Correlation Between Experian Plc and FTI Consulting

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

By analyzing existing cross correlation between Experian plc PK and FTI Consulting, you can compare the effects of market volatilities on Experian Plc and FTI Consulting 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 FTI Consulting. Check out your portfolio center. Please also check ongoing floating volatility patterns of Experian Plc and FTI Consulting.

Diversification Opportunities for Experian Plc and FTI Consulting

0.78

Correlation Coefficient

Experian Plc  FTI Consulting

Poor diversification

The 3 months correlation between Experian and FTI is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Experian plc PK and FTI Consulting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTI Consulting 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 PK are associated (or correlated) with FTI Consulting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTI Consulting has no effect on the direction of Experian Plc i.e., Experian Plc and FTI Consulting go up and down completely randomly.

Pair Corralation between Experian Plc and FTI Consulting

Assuming the 90 days horizon Experian plc PK is expected to generate 0.68 times more return on investment than FTI Consulting. However, Experian plc PK is 1.48 times less risky than FTI Consulting. It trades about -0.14 of its potential returns per unit of risk. FTI Consulting is currently generating about -0.11 per unit of risk. If you would invest  5,149  in Experian plc PK on September 19, 2024 and sell it today you would lose (576.00) from holding Experian plc PK or give up 11.19% of portfolio value over 90 days.

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

Experian plc PK  vs.  FTI Consulting

Experian plc PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Experian plc PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

FTI Consulting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTI Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Experian Plc and FTI Consulting

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

The idea behind Experian plc PK and FTI Consulting 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.