Correlation Between GAMES OPERATORS and Pearson Plc

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

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

Diversification Opportunities for GAMES OPERATORS and Pearson Plc

0.42

Correlation Coefficient

GAMES OPERATORS  Pearson Plc

Very weak diversification

The 3 months correlation between GAMES and Pearson is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding GAMES OPERATORS SA and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc and GAMES OPERATORS 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 GAMES OPERATORS SA 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 GAMES OPERATORS i.e., GAMES OPERATORS and Pearson Plc go up and down completely randomly.

Pair Corralation between GAMES OPERATORS and Pearson Plc

Assuming the 90 days horizon GAMES OPERATORS SA is expected to generate 1.64 times more return on investment than Pearson Plc. However, GAMES OPERATORS is 1.64 times more volatile than Pearson plc. It trades about 0.15 of its potential returns per unit of risk. Pearson plc is currently generating about 0.0 per unit of risk. If you would invest  318.00  in GAMES OPERATORS SA on December 20, 2024 and sell it today you would earn a total of  82.00  from holding GAMES OPERATORS SA or generate 25.79% return on investment over 90 days.

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

GAMES OPERATORS SA  vs.  Pearson plc

GAMES OPERATORS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GAMES OPERATORS SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, GAMES OPERATORS reported solid returns over the last few months and may actually be approaching a breakup point.

Pearson plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pearson plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Pearson 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 GAMES OPERATORS and Pearson Plc

The main advantage of trading using opposite GAMES OPERATORS and Pearson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GAMES OPERATORS 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 GAMES OPERATORS SA 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.