Correlation Between Hollywood Bowl and Pearson Plc

Can any of the company-specific risk be diversified away by investing in both Hollywood Bowl 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 Hollywood Bowl and Pearson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hollywood Bowl Group and Pearson plc, you can compare the effects of market volatilities on Hollywood Bowl 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 Hollywood Bowl with a short position of Pearson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hollywood Bowl and Pearson Plc.

Diversification Opportunities for Hollywood Bowl and Pearson Plc

-0.43

Correlation Coefficient

Hollywood Bowl  Pearson Plc

Very good diversification

The 3 months correlation between Hollywood and Pearson is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hollywood Bowl Group and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc and Hollywood Bowl 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 Hollywood Bowl 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 Hollywood Bowl i.e., Hollywood Bowl and Pearson Plc go up and down completely randomly.

Pair Corralation between Hollywood Bowl and Pearson Plc

Assuming the 90 days horizon Hollywood Bowl Group is expected to under-perform the Pearson Plc. In addition to that, Hollywood Bowl is 1.74 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 -0.1 per unit of volatility. If you would invest  1,520  in Pearson plc on October 25, 2024 and sell it today you would lose (30.00) from holding Pearson plc or give up 1.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Hollywood Bowl Group  vs.  Pearson plc

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pearson plc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson plc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pearson Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hollywood Bowl and Pearson Plc

The main advantage of trading using opposite Hollywood Bowl and Pearson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hollywood Bowl 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 Hollywood Bowl Group 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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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.