Correlation Between WPP PLC and Cimpress

Can any of the company-specific risk be diversified away by investing in both WPP PLC and Cimpress 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 Cimpress 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 Cimpress NV, you can compare the effects of market volatilities on WPP PLC and Cimpress 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 Cimpress. Check out your portfolio center. Please also check ongoing floating volatility patterns of WPP PLC and Cimpress.

Diversification Opportunities for WPP PLC and Cimpress

0.66

Correlation Coefficient

WPP PLC  Cimpress

Poor diversification

The 3 months correlation between WPP and Cimpress is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Cimpress NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cimpress NV 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 Cimpress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cimpress NV has no effect on the direction of WPP PLC i.e., WPP PLC and Cimpress go up and down completely randomly.

Pair Corralation between WPP PLC and Cimpress

Considering the 90-day investment horizon WPP PLC ADR is expected to generate 0.84 times more return on investment than Cimpress. However, WPP PLC ADR is 1.2 times less risky than Cimpress. It trades about -0.17 of its potential returns per unit of risk. Cimpress NV is currently generating about -0.24 per unit of risk. If you would invest  5,136  in WPP PLC ADR on December 28, 2024 and sell it today you would lose (1,250) from holding WPP PLC ADR or give up 24.34% of portfolio value over 90 days.

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

WPP PLC ADR  vs.  Cimpress NV

WPP PLC ADR

Risk-Adjusted Performance

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 April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cimpress NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cimpress NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with WPP PLC and Cimpress

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

The idea behind WPP PLC ADR and Cimpress NV 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.