Correlation Between Wise Plc and Appen

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

By analyzing existing cross correlation between Wise plc and Appen Limited, you can compare the effects of market volatilities on Wise Plc and Appen 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 Wise Plc with a short position of Appen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wise Plc and Appen.

Diversification Opportunities for Wise Plc and Appen

-0.04

Correlation Coefficient

Wise Plc  Appen

Good diversification

The 3 months correlation between Wise and Appen is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Wise plc and Appen Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appen Limited and Wise Plc 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 Wise plc are associated (or correlated) with Appen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appen Limited has no effect on the direction of Wise Plc i.e., Wise Plc and Appen go up and down completely randomly.

Pair Corralation between Wise Plc and Appen

Assuming the 90 days horizon Wise Plc is expected to generate 6.45 times less return on investment than Appen. But when comparing it to its historical volatility, Wise plc is 6.64 times less risky than Appen. It trades about 0.06 of its potential returns per unit of risk. Appen Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  92.00  in Appen Limited on September 28, 2024 and sell it today you would lose (26.00) from holding Appen Limited or give up 28.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Wise plc  vs.  Appen Limited

Wise plc

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental indicators, Wise Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Appen Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Appen Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Appen may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Wise Plc and Appen

The main advantage of trading using opposite Wise Plc and Appen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wise Plc position performs unexpectedly, Appen 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 Appen will offset losses from the drop in Appen's long position.

The idea behind Wise plc and Appen Limited 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.