Correlation Between WPP PLC and INGERSOLL

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

Diversification Opportunities for WPP PLC and INGERSOLL

-0.51

Correlation Coefficient

WPP PLC  INGERSOLL

Excellent diversification

The 3 months correlation between WPP and INGERSOLL is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and INGERSOLL RAND LUXEMBOURG FINA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INGERSOLL RAND LUXEM 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 INGERSOLL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INGERSOLL RAND LUXEM has no effect on the direction of WPP PLC i.e., WPP PLC and INGERSOLL go up and down completely randomly.

Pair Corralation between WPP PLC and INGERSOLL

Considering the 90-day investment horizon WPP PLC is expected to generate 56.21 times less return on investment than INGERSOLL. But when comparing it to its historical volatility, WPP PLC ADR is 30.07 times less risky than INGERSOLL. It trades about 0.02 of its potential returns per unit of risk. INGERSOLL RAND LUXEMBOURG FINANCE is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,281  in INGERSOLL RAND LUXEMBOURG FINANCE on September 25, 2024 and sell it today you would earn a total of  204.00  from holding INGERSOLL RAND LUXEMBOURG FINANCE or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.35%
Values	Daily Returns

WPP PLC ADR  vs.  INGERSOLL RAND LUXEMBOURG FINA

WPP PLC ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WPP PLC ADR are ranked lower than 4 (%) 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.

INGERSOLL RAND LUXEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INGERSOLL RAND LUXEMBOURG FINANCE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INGERSOLL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WPP PLC and INGERSOLL

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

The idea behind WPP PLC ADR and INGERSOLL RAND LUXEMBOURG FINANCE 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 Transaction History module to view history of all your transactions and understand their impact on performance.