Correlation Between Thomson Reuters and Global Payments
Can any of the company-specific risk be diversified away by investing in both Thomson Reuters and Global Payments 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 Thomson Reuters and Global Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Thomson Reuters Corp and Global Payments, you can compare the effects of market volatilities on Thomson Reuters and Global Payments 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 Thomson Reuters with a short position of Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Thomson Reuters and Global Payments.
Diversification Opportunities for Thomson Reuters and Global Payments
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Thomson and Global is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Thomson Reuters Corp and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments and Thomson Reuters 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 Thomson Reuters Corp are associated (or correlated) with Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Thomson Reuters i.e., Thomson Reuters and Global Payments go up and down completely randomly.
Pair Corralation between Thomson Reuters and Global Payments
Considering the 90-day investment horizon Thomson Reuters Corp is expected to under-perform the Global Payments. But the stock apears to be less risky and, when comparing its historical volatility, Thomson Reuters Corp is 1.66 times less risky than Global Payments. The stock trades about -0.1 of its potential returns per unit of risk. The Global Payments is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 9,953 in Global Payments on August 25, 2024 and sell it today you would earn a total of 1,752 from holding Global Payments or generate 17.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Thomson Reuters Corp vs. Global Payments
Performance |
| Timeline |
| Thomson Reuters Corp |
| Global Payments |
Thomson Reuters and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Thomson Reuters and Global Payments
The main advantage of trading using opposite Thomson Reuters and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thomson Reuters position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' long position.| Thomson Reuters vs. Rentokil Initial PLC | Thomson Reuters vs. Performant Financial | Thomson Reuters vs. Cass Information Systems | Thomson Reuters vs. Maximus |
| Global Payments vs. Copart Inc | Global Payments vs. ABM Industries Incorporated | Global Payments vs. Thomson Reuters Corp | Global Payments vs. Aramark Holdings |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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