Correlation Between Montauk Renewables and WPP PLC

Can any of the company-specific risk be diversified away by investing in both Montauk Renewables 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 Montauk Renewables and WPP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Montauk Renewables and WPP PLC ADR, you can compare the effects of market volatilities on Montauk Renewables 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 Montauk Renewables with a short position of WPP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montauk Renewables and WPP PLC.

Diversification Opportunities for Montauk Renewables and WPP PLC

0.11

Correlation Coefficient

Montauk Renewables  WPP PLC

Average diversification

The 3 months correlation between Montauk and WPP is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and WPP PLC go up and down completely randomly.

Pair Corralation between Montauk Renewables and WPP PLC

Given the investment horizon of 90 days Montauk Renewables is expected to generate 3.15 times more return on investment than WPP PLC. However, Montauk Renewables is 3.15 times more volatile than WPP PLC ADR. It trades about 0.15 of its potential returns per unit of risk. WPP PLC ADR is currently generating about -0.46 per unit of risk. If you would invest  378.00  in Montauk Renewables on October 23, 2024 and sell it today you would earn a total of  49.00  from holding Montauk Renewables or generate 12.96% return on investment over 90 days.

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

Montauk Renewables  vs.  WPP PLC ADR

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Montauk Renewables and WPP PLC

The main advantage of trading using opposite Montauk Renewables and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.