Correlation Between Flutter Entertainment and Pearson Plc
Can any of the company-specific risk be diversified away by investing in both Flutter Entertainment 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 Flutter Entertainment and Pearson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flutter Entertainment PLC and Pearson plc, you can compare the effects of market volatilities on Flutter Entertainment 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 Flutter Entertainment with a short position of Pearson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flutter Entertainment and Pearson Plc.
Diversification Opportunities for Flutter Entertainment and Pearson Plc
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Flutter and Pearson is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Flutter Entertainment PLC and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc and Flutter Entertainment 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 Flutter Entertainment PLC 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 Flutter Entertainment i.e., Flutter Entertainment and Pearson Plc go up and down completely randomly.
Pair Corralation between Flutter Entertainment and Pearson Plc
Assuming the 90 days trading horizon Flutter Entertainment PLC is expected to generate 2.17 times more return on investment than Pearson Plc. However, Flutter Entertainment is 2.17 times more volatile than Pearson plc. It trades about 0.11 of its potential returns per unit of risk. Pearson plc is currently generating about 0.18 per unit of risk. If you would invest 18,060 in Flutter Entertainment PLC on September 3, 2024 and sell it today you would earn a total of 7,520 from holding Flutter Entertainment PLC or generate 41.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flutter Entertainment PLC vs. Pearson plc
Performance |
| Timeline |
| Flutter Entertainment PLC |
| Pearson plc |
Flutter Entertainment and Pearson Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flutter Entertainment and Pearson Plc
The main advantage of trading using opposite Flutter Entertainment and Pearson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flutter Entertainment 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.The idea behind Flutter Entertainment PLC and Pearson 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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