Correlation Between Ferguson Plc and Porvair Plc

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

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

Diversification Opportunities for Ferguson Plc and Porvair Plc

0.01

Correlation Coefficient

Ferguson Plc  Porvair Plc

Significant diversification

The 3 months correlation between Ferguson and Porvair is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and Porvair plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porvair plc and Ferguson 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 Ferguson Plc are associated (or correlated) with Porvair Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porvair plc has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and Porvair Plc go up and down completely randomly.

Pair Corralation between Ferguson Plc and Porvair Plc

Given the investment horizon of 90 days Ferguson Plc is expected to generate 1.59 times more return on investment than Porvair Plc. However, Ferguson Plc is 1.59 times more volatile than Porvair plc. It trades about 0.05 of its potential returns per unit of risk. Porvair plc is currently generating about 0.07 per unit of risk. If you would invest  12,405  in Ferguson Plc on September 24, 2024 and sell it today you would earn a total of  5,412  from holding Ferguson Plc or generate 43.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	69.48%
Values	Daily Returns

Ferguson Plc  vs.  Porvair plc

Ferguson Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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.

Porvair plc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Porvair plc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Porvair Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Ferguson Plc and Porvair Plc

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

The idea behind Ferguson Plc and Porvair plc 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.