Correlation Between COPT Defense and WPP PLC

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

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

Diversification Opportunities for COPT Defense and WPP PLC

0.69

Correlation Coefficient

COPT Defense  WPP PLC

Poor diversification

The 3 months correlation between COPT and WPP is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding COPT Defense Properties and WPP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WPP PLC ADR and COPT Defense 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 COPT Defense Properties 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 ADR has no effect on the direction of COPT Defense i.e., COPT Defense and WPP PLC go up and down completely randomly.

Pair Corralation between COPT Defense and WPP PLC

Considering the 90-day investment horizon COPT Defense Properties is expected to generate 0.94 times more return on investment than WPP PLC. However, COPT Defense Properties is 1.07 times less risky than WPP PLC. It trades about 0.04 of its potential returns per unit of risk. WPP PLC ADR is currently generating about 0.02 per unit of risk. If you would invest  2,373  in COPT Defense Properties on September 30, 2024 and sell it today you would earn a total of  731.00  from holding COPT Defense Properties or generate 30.8% return on investment over 90 days.

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

COPT Defense Properties  vs.  WPP PLC ADR

COPT Defense Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COPT Defense Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, COPT Defense is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

WPP PLC ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in WPP PLC ADR are ranked lower than 3 (%) 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.

Pair Trading with COPT Defense and WPP PLC

The main advantage of trading using opposite COPT Defense and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if COPT Defense 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 COPT Defense Properties and WPP PLC ADR 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.