Correlation Between WEC Energy and Pearson PLC
Can any of the company-specific risk be diversified away by investing in both WEC Energy 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 WEC Energy and Pearson PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEC Energy Group and Pearson PLC ADR, you can compare the effects of market volatilities on WEC Energy 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 WEC Energy with a short position of Pearson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and Pearson PLC.
Diversification Opportunities for WEC Energy and Pearson PLC
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between WEC and Pearson is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR and WEC Energy 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 WEC Energy 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 ADR has no effect on the direction of WEC Energy i.e., WEC Energy and Pearson PLC go up and down completely randomly.
Pair Corralation between WEC Energy and Pearson PLC
Considering the 90-day investment horizon WEC Energy is expected to generate 3.88 times less return on investment than Pearson PLC. But when comparing it to its historical volatility, WEC Energy Group is 1.38 times less risky than Pearson PLC. It trades about 0.13 of its potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,335 in Pearson PLC ADR on August 23, 2024 and sell it today you would earn a total of 176.00 from holding Pearson PLC ADR or generate 13.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
WEC Energy Group vs. Pearson PLC ADR
Performance |
| Timeline |
| WEC Energy Group |
| Pearson PLC ADR |
WEC Energy and Pearson PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and Pearson PLC
The main advantage of trading using opposite WEC Energy and Pearson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy 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.| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC Energy vs. Evergy, |
| Pearson PLC vs. John Wiley Sons | Pearson PLC vs. New York Times | Pearson PLC vs. Lee Enterprises Incorporated | Pearson PLC vs. John Wiley Sons |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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