Correlation Between Formula Systems and Informa PLC
Can any of the company-specific risk be diversified away by investing in both Formula Systems 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 Formula Systems and Informa PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formula Systems 1985 and Informa PLC ADR, you can compare the effects of market volatilities on Formula Systems 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 Formula Systems with a short position of Informa PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula Systems and Informa PLC.
Diversification Opportunities for Formula Systems and Informa PLC
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Formula and Informa is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Formula Systems 1985 and Informa PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Informa PLC ADR and Formula Systems 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 Formula Systems 1985 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 ADR has no effect on the direction of Formula Systems i.e., Formula Systems and Informa PLC go up and down completely randomly.
Pair Corralation between Formula Systems and Informa PLC
Assuming the 90 days horizon Formula Systems 1985 is expected to generate 1.52 times more return on investment than Informa PLC. However, Formula Systems is 1.52 times more volatile than Informa PLC ADR. It trades about 0.1 of its potential returns per unit of risk. Informa PLC ADR is currently generating about -0.01 per unit of risk. If you would invest 7,320 in Formula Systems 1985 on August 30, 2024 and sell it today you would earn a total of 1,205 from holding Formula Systems 1985 or generate 16.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formula Systems 1985 vs. Informa PLC ADR
Performance |
| Timeline |
| Formula Systems 1985 |
| Informa PLC ADR |
Formula Systems and Informa PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formula Systems and Informa PLC
The main advantage of trading using opposite Formula Systems and Informa PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formula Systems 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.| Formula Systems vs. CSP Inc | Formula Systems vs. Nayax | Formula Systems vs. Information Services Group | Formula Systems vs. The Hackett Group |
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Check out your portfolio center.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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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