Correlation Between China VTV and Pearson PLC

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

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

Diversification Opportunities for China VTV and Pearson PLC

0.0

Correlation Coefficient

China VTV  Pearson PLC

Pay attention - limited upside

The 3 months correlation between China and Pearson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China VTV and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR and China VTV 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 China VTV are associated (or correlated) with Pearson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson PLC ADR has no effect on the direction of China VTV i.e., China VTV and Pearson PLC go up and down completely randomly.

Pair Corralation between China VTV and Pearson PLC

If you would invest  1,357  in Pearson PLC ADR on September 29, 2024 and sell it today you would earn a total of  264.00  from holding Pearson PLC ADR or generate 19.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

China VTV  vs.  Pearson PLC ADR

China VTV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China VTV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, China VTV is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pearson PLC ADR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Pearson PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China VTV and Pearson PLC

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

The idea behind China VTV and Pearson 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..