Correlation Between WPP PLC and Corning Incorporated

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

Diversification Opportunities for WPP PLC and Corning Incorporated

0.74

Correlation Coefficient

WPP PLC  Corning Incorporated

Poor diversification

The 3 months correlation between WPP and Corning is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Corning Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corning Incorporated 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 Corning Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corning Incorporated has no effect on the direction of WPP PLC i.e., WPP PLC and Corning Incorporated go up and down completely randomly.

Pair Corralation between WPP PLC and Corning Incorporated

Considering the 90-day investment horizon WPP PLC ADR is expected to under-perform the Corning Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, WPP PLC ADR is 1.3 times less risky than Corning Incorporated. The stock trades about -0.67 of its potential returns per unit of risk. The Corning Incorporated is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  4,851  in Corning Incorporated on October 8, 2024 and sell it today you would lose (101.00) from holding Corning Incorporated or give up 2.08% 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.  Corning Incorporated

WPP PLC ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WPP PLC ADR are ranked lower than 2 (%) 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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Corning Incorporated

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corning Incorporated are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Corning Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WPP PLC and Corning Incorporated

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

The idea behind WPP PLC ADR and Corning Incorporated 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.