Correlation Between Pearson PLC and Informa Plc

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

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

Diversification Opportunities for Pearson PLC and Informa Plc

-0.73

Correlation Coefficient

Pearson PLC  Informa Plc

Pay attention - limited upside

The 3 months correlation between Pearson and Informa is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Pearson PLC ADR and Informa plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Informa plc and Pearson 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 Pearson PLC ADR are associated (or correlated) with Informa Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Informa plc has no effect on the direction of Pearson PLC i.e., Pearson PLC and Informa Plc go up and down completely randomly.

Pair Corralation between Pearson PLC and Informa Plc

Considering the 90-day investment horizon Pearson PLC is expected to generate 1.21 times less return on investment than Informa Plc. But when comparing it to its historical volatility, Pearson PLC ADR is 2.8 times less risky than Informa Plc. It trades about 0.11 of its potential returns per unit of risk. Informa plc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  967.00  in Informa plc on September 4, 2024 and sell it today you would earn a total of  145.00  from holding Informa plc or generate 14.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	56.28%
Values	Daily Returns

Pearson PLC ADR  vs.  Informa plc

Pearson PLC ADR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pearson PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Informa plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Informa plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward-looking indicators, Informa Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pearson PLC and Informa Plc

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

The idea behind Pearson PLC ADR and Informa 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.