Correlation Between Treatt Plc and Ferguson Plc

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

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

Diversification Opportunities for Treatt Plc and Ferguson Plc

-0.21

Correlation Coefficient

Treatt Plc  Ferguson Plc

Very good diversification

The 3 months correlation between Treatt and Ferguson is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Treatt plc and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and Treatt 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 Treatt plc are associated (or correlated) with Ferguson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferguson Plc has no effect on the direction of Treatt Plc i.e., Treatt Plc and Ferguson Plc go up and down completely randomly.

Pair Corralation between Treatt Plc and Ferguson Plc

Assuming the 90 days horizon Treatt plc is expected to generate 1.87 times more return on investment than Ferguson Plc. However, Treatt Plc is 1.87 times more volatile than Ferguson Plc. It trades about 0.05 of its potential returns per unit of risk. Ferguson Plc is currently generating about -0.09 per unit of risk. If you would invest  575.00  in Treatt plc on September 26, 2024 and sell it today you would earn a total of  40.00  from holding Treatt plc or generate 6.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Treatt plc  vs.  Ferguson Plc

Treatt plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Treatt plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Treatt Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Treatt Plc and Ferguson Plc

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

The idea behind Treatt plc and Ferguson 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.