Correlation Between FactSet Research and London Stock

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

By analyzing existing cross correlation between FactSet Research Systems and London Stock Exchange, you can compare the effects of market volatilities on FactSet Research and London Stock 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 FactSet Research with a short position of London Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of FactSet Research and London Stock.

Diversification Opportunities for FactSet Research and London Stock

0.62

Correlation Coefficient

FactSet Research  London Stock

Poor diversification

The 3 months correlation between FactSet and London is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and London Stock Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on London Stock Exchange and FactSet Research 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 FactSet Research Systems are associated (or correlated) with London Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of London Stock Exchange has no effect on the direction of FactSet Research i.e., FactSet Research and London Stock go up and down completely randomly.

Pair Corralation between FactSet Research and London Stock

Considering the 90-day investment horizon FactSet Research is expected to generate 3.63 times less return on investment than London Stock. But when comparing it to its historical volatility, FactSet Research Systems is 1.47 times less risky than London Stock. It trades about 0.11 of its potential returns per unit of risk. London Stock Exchange is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  13,550  in London Stock Exchange on September 20, 2024 and sell it today you would earn a total of  950.00  from holding London Stock Exchange or generate 7.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

FactSet Research Systems  vs.  London Stock Exchange

FactSet Research Systems

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in FactSet Research Systems are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

London Stock Exchange

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in London Stock Exchange are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, London Stock is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FactSet Research and London Stock

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

The idea behind FactSet Research Systems and London Stock Exchange 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.