Correlation Between WPP PLC and BOS Better

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

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

Diversification Opportunities for WPP PLC and BOS Better

0.62

Correlation Coefficient

WPP PLC  BOS Better

Poor diversification

The 3 months correlation between WPP and BOS is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and BOS Better Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOS Better Online and WPP 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 WPP PLC ADR are associated (or correlated) with BOS Better. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOS Better Online has no effect on the direction of WPP PLC i.e., WPP PLC and BOS Better go up and down completely randomly.

Pair Corralation between WPP PLC and BOS Better

Considering the 90-day investment horizon WPP PLC ADR is expected to generate 0.78 times more return on investment than BOS Better. However, WPP PLC ADR is 1.28 times less risky than BOS Better. It trades about 0.07 of its potential returns per unit of risk. BOS Better Online is currently generating about 0.05 per unit of risk. If you would invest  4,033  in WPP PLC ADR on September 24, 2024 and sell it today you would earn a total of  1,196  from holding WPP PLC ADR or generate 29.66% return on investment over 90 days.

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

WPP PLC ADR  vs.  BOS Better Online

WPP PLC ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WPP PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, WPP PLC is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

BOS Better Online

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOS Better Online are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, BOS Better may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WPP PLC and BOS Better

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

The idea behind WPP PLC ADR and BOS Better Online 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.