Correlation Between Magnite and WPP PLC

Can any of the company-specific risk be diversified away by investing in both Magnite and WPP PLC at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Magnite and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Magnite and WPP PLC ADR, you can compare the effects of market volatilities on Magnite and WPP PLC and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Magnite with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magnite and WPP PLC.

Diversification Opportunities for Magnite and WPP PLC

0.28

Correlation Coefficient

Magnite  WPP PLC

Modest diversification

The 3 months correlation between Magnite and WPP is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Magnite and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR and Magnite is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Magnite are associated (or correlated) with WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC ADR has no effect on the direction of Magnite i.e., Magnite and WPP PLC go up and down completely randomly.

Pair Corralation between Magnite and WPP PLC

Given the investment horizon of 90 days Magnite is expected to generate 1.97 times more return on investment than WPP PLC. However, Magnite is 1.97 times more volatile than WPP PLC ADR. It trades about 0.13 of its potential returns per unit of risk. WPP PLC ADR is currently generating about -0.1 per unit of risk. If you would invest  1,240  in Magnite on October 12, 2024 and sell it today you would earn a total of  321.00  from holding Magnite or generate 25.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Magnite  vs.  WPP PLC ADR

Magnite

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Magnite are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Magnite demonstrated solid returns over the last few months and may actually be approaching a breakup point.

WPP PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WPP PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Magnite and WPP PLC

The main advantage of trading using opposite Magnite and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magnite position performs unexpectedly, WPP PLC can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WPP PLC will offset losses from the drop in WPP PLC's long position.

The idea behind Magnite and WPP PLC ADR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.