Correlation Between Mastermind and WPP PLC

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

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

Diversification Opportunities for Mastermind and WPP PLC

-0.15

Correlation Coefficient

Mastermind  WPP PLC

Good diversification

The 3 months correlation between Mastermind and WPP is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Mastermind 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 Mastermind 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 Mastermind 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 Mastermind i.e., Mastermind and WPP PLC go up and down completely randomly.

Pair Corralation between Mastermind and WPP PLC

Given the investment horizon of 90 days Mastermind is expected to generate 18.07 times more return on investment than WPP PLC. However, Mastermind is 18.07 times more volatile than WPP PLC ADR. It trades about 0.06 of its potential returns per unit of risk. WPP PLC ADR is currently generating about -0.08 per unit of risk. If you would invest  6.00  in Mastermind on September 24, 2024 and sell it today you would lose (1.00) from holding Mastermind or give up 16.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Mastermind  vs.  WPP PLC ADR

Mastermind

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mastermind are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Mastermind exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Mastermind and WPP PLC

The main advantage of trading using opposite Mastermind and WPP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mastermind 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 Mastermind 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.