Correlation Between Austevoll Seafood and WPP PLC

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

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

Diversification Opportunities for Austevoll Seafood and WPP PLC

0.34

Correlation Coefficient

Austevoll Seafood  WPP PLC

Weak diversification

The 3 months correlation between Austevoll and WPP is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Austevoll Seafood ASA and WPP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC and Austevoll Seafood 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 Austevoll Seafood ASA are associated (or correlated) with WPP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WPP PLC has no effect on the direction of Austevoll Seafood i.e., Austevoll Seafood and WPP PLC go up and down completely randomly.

Pair Corralation between Austevoll Seafood and WPP PLC

Assuming the 90 days horizon Austevoll Seafood ASA is expected to generate 1.45 times more return on investment than WPP PLC. However, Austevoll Seafood is 1.45 times more volatile than WPP PLC. It trades about 0.07 of its potential returns per unit of risk. WPP PLC is currently generating about 0.04 per unit of risk. If you would invest  800.00  in Austevoll Seafood ASA on October 6, 2024 and sell it today you would earn a total of  43.00  from holding Austevoll Seafood ASA or generate 5.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Austevoll Seafood ASA  vs.  WPP PLC

Austevoll Seafood ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Austevoll Seafood ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Austevoll Seafood is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

WPP PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WPP PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WPP PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Austevoll Seafood and WPP PLC

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

The idea behind Austevoll Seafood ASA and WPP PLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.