Correlation Between Experian PLC and SGS SA

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

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

Diversification Opportunities for Experian PLC and SGS SA

0.68

Correlation Coefficient

Experian PLC  SGS SA

Poor diversification

The 3 months correlation between Experian and SGS is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Experian PLC and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and Experian 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 Experian PLC are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Experian PLC i.e., Experian PLC and SGS SA go up and down completely randomly.

Pair Corralation between Experian PLC and SGS SA

Assuming the 90 days horizon Experian PLC is expected to generate 0.58 times more return on investment than SGS SA. However, Experian PLC is 1.71 times less risky than SGS SA. It trades about -0.06 of its potential returns per unit of risk. SGS SA is currently generating about -0.06 per unit of risk. If you would invest  4,952  in Experian PLC on September 18, 2024 and sell it today you would lose (323.00) from holding Experian PLC or give up 6.52% of portfolio value over 90 days.

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

Experian PLC  vs.  SGS SA

Experian PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Experian PLC and SGS SA

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

The idea behind Experian PLC and SGS SA 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.