Correlation Between WPP PLC and Boston Omaha

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

Diversification Opportunities for WPP PLC and Boston Omaha

-0.77

Correlation Coefficient

WPP PLC  Boston Omaha

Pay attention - limited upside

The 3 months correlation between WPP and Boston is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding WPP PLC ADR and Boston Omaha Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Omaha Corp 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 Boston Omaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Omaha Corp has no effect on the direction of WPP PLC i.e., WPP PLC and Boston Omaha go up and down completely randomly.

Pair Corralation between WPP PLC and Boston Omaha

Considering the 90-day investment horizon WPP PLC ADR is expected to generate 0.4 times more return on investment than Boston Omaha. However, WPP PLC ADR is 2.53 times less risky than Boston Omaha. It trades about -0.06 of its potential returns per unit of risk. Boston Omaha Corp is currently generating about -0.13 per unit of risk. If you would invest  5,220  in WPP PLC ADR on March 9, 2024 and sell it today you would lose (87.00) from holding WPP PLC ADR or give up 1.67% of portfolio value over 90 days.

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

WPP PLC ADR  vs.  Boston Omaha Corp

WPP PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WPP PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, WPP PLC reported solid returns over the last few months and may actually be approaching a breakup point.

Boston Omaha Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Omaha Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with WPP PLC and Boston Omaha

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

The idea behind WPP PLC ADR and Boston Omaha Corp 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.