Correlation Between Marstons PLC and Autogrill SpA

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

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

Diversification Opportunities for Marstons PLC and Autogrill SpA

0.02

Correlation Coefficient

Marstons PLC  Autogrill SpA

Significant diversification

The 3 months correlation between Marstons and Autogrill is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Marstons PLC and Autogrill SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Autogrill SpA ADR and Marstons 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 Marstons PLC are associated (or correlated) with Autogrill SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Autogrill SpA ADR has no effect on the direction of Marstons PLC i.e., Marstons PLC and Autogrill SpA go up and down completely randomly.

Pair Corralation between Marstons PLC and Autogrill SpA

Assuming the 90 days horizon Marstons PLC is expected to generate 4.27 times less return on investment than Autogrill SpA. But when comparing it to its historical volatility, Marstons PLC is 1.21 times less risky than Autogrill SpA. It trades about 0.02 of its potential returns per unit of risk. Autogrill SpA ADR is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  625.00  in Autogrill SpA ADR on September 1, 2024 and sell it today you would earn a total of  200.00  from holding Autogrill SpA ADR or generate 32.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	31.05%
Values	Daily Returns

Marstons PLC  vs.  Autogrill SpA ADR

Marstons PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marstons PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Marstons PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Autogrill SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Marstons PLC and Autogrill SpA

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

The idea behind Marstons PLC and Autogrill SpA ADR 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.