Correlation Between Informa PLC and Legible

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

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

Diversification Opportunities for Informa PLC and Legible

-0.68

Correlation Coefficient

Informa PLC  Legible

Excellent diversification

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

Pair Corralation between Informa PLC and Legible

Assuming the 90 days horizon Informa PLC ADR is expected to under-perform the Legible. But the pink sheet apears to be less risky and, when comparing its historical volatility, Informa PLC ADR is 9.03 times less risky than Legible. The pink sheet trades about 0.0 of its potential returns per unit of risk. The Legible is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  3.75  in Legible on September 3, 2024 and sell it today you would earn a total of  0.85  from holding Legible or generate 22.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Informa PLC ADR  vs.  Legible

Informa PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Informa PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Informa PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Legible

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legible are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Legible reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Informa PLC and Legible

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

The idea behind Informa PLC ADR and Legible 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.