Correlation Between Experian Plc and Broadridge Financial

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

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

Diversification Opportunities for Experian Plc and Broadridge Financial

-0.6

Correlation Coefficient

Experian Plc  Broadridge Financial

Excellent diversification

The 3 months correlation between Experian and Broadridge is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Experian plc and Broadridge Financial Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadridge Financial 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 Broadridge Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadridge Financial has no effect on the direction of Experian Plc i.e., Experian Plc and Broadridge Financial go up and down completely randomly.

Pair Corralation between Experian Plc and Broadridge Financial

Assuming the 90 days horizon Experian plc is expected to under-perform the Broadridge Financial. But the stock apears to be less risky and, when comparing its historical volatility, Experian plc is 1.01 times less risky than Broadridge Financial. The stock trades about -0.08 of its potential returns per unit of risk. The Broadridge Financial Solutions is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  18,526  in Broadridge Financial Solutions on September 23, 2024 and sell it today you would earn a total of  2,874  from holding Broadridge Financial Solutions or generate 15.51% return on investment over 90 days.

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

Experian plc  vs.  Broadridge Financial Solutions

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 latest fragile 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.

Broadridge Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broadridge Financial Solutions are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Broadridge Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Experian Plc and Broadridge Financial

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

The idea behind Experian plc and Broadridge Financial Solutions 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.