Correlation Between Performance Food and Pearson Plc
Can any of the company-specific risk be diversified away by investing in both Performance Food and Pearson 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 Performance Food and Pearson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Performance Food Group and Pearson plc, you can compare the effects of market volatilities on Performance Food and Pearson 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 Performance Food with a short position of Pearson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Performance Food and Pearson Plc.
Diversification Opportunities for Performance Food and Pearson Plc
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Performance and Pearson is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Performance Food Group and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc and Performance Food 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 Performance Food Group are associated (or correlated) with Pearson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson plc has no effect on the direction of Performance Food i.e., Performance Food and Pearson Plc go up and down completely randomly.
Pair Corralation between Performance Food and Pearson Plc
Assuming the 90 days trading horizon Performance Food Group is expected to under-perform the Pearson Plc. In addition to that, Performance Food is 1.29 times more volatile than Pearson plc. It trades about -0.13 of its total potential returns per unit of risk. Pearson plc is currently generating about 0.05 per unit of volatility. If you would invest 1,520 in Pearson plc on October 15, 2024 and sell it today you would earn a total of 10.00 from holding Pearson plc or generate 0.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Performance Food Group vs. Pearson plc
Performance |
| Timeline |
| Performance Food |
| Pearson plc |
Performance Food and Pearson Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Performance Food and Pearson Plc
The main advantage of trading using opposite Performance Food and Pearson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Performance Food position performs unexpectedly, Pearson 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 Pearson Plc will offset losses from the drop in Pearson Plc's long position.| Performance Food vs. PEPTONIC MEDICAL | Performance Food vs. MEDICAL FACILITIES NEW | Performance Food vs. GLOBUS MEDICAL A | Performance Food vs. ONWARD MEDICAL BV |
| Pearson Plc vs. SEALED AIR | Pearson Plc vs. Pentair plc | Pearson Plc vs. Eidesvik Offshore ASA | Pearson Plc vs. Performance Food Group |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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