Correlation Between Peijia Medical and Informa PLC

Can any of the company-specific risk be diversified away by investing in both Peijia Medical and Informa 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 Peijia Medical and Informa PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Peijia Medical Limited and Informa PLC, you can compare the effects of market volatilities on Peijia Medical and Informa 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 Peijia Medical with a short position of Informa PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peijia Medical and Informa PLC.

Diversification Opportunities for Peijia Medical and Informa PLC

-0.25

Correlation Coefficient

Peijia Medical  Informa PLC

Very good diversification

The 3 months correlation between Peijia and Informa is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Peijia Medical Limited and Informa PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Informa PLC and Peijia Medical 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 Peijia Medical Limited are associated (or correlated) with Informa PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Informa PLC has no effect on the direction of Peijia Medical i.e., Peijia Medical and Informa PLC go up and down completely randomly.

Pair Corralation between Peijia Medical and Informa PLC

Assuming the 90 days horizon Peijia Medical Limited is expected to generate 2.07 times more return on investment than Informa PLC. However, Peijia Medical is 2.07 times more volatile than Informa PLC. It trades about 0.12 of its potential returns per unit of risk. Informa PLC is currently generating about -0.04 per unit of risk. If you would invest  45.00  in Peijia Medical Limited on December 20, 2024 and sell it today you would earn a total of  11.00  from holding Peijia Medical Limited or generate 24.44% return on investment over 90 days.

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

Peijia Medical Limited  vs.  Informa PLC

Peijia Medical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peijia Medical Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Peijia Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Informa PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Informa PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Informa PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Peijia Medical and Informa PLC

The main advantage of trading using opposite Peijia Medical and Informa PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peijia Medical position performs unexpectedly, Informa 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 Informa PLC will offset losses from the drop in Informa PLC's long position.

The idea behind Peijia Medical Limited and Informa 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.