Correlation Between GlobalData PLC and EasyJet PLC

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

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

Diversification Opportunities for GlobalData PLC and EasyJet PLC

-0.1

Correlation Coefficient

GlobalData PLC  EasyJet PLC

Good diversification

The 3 months correlation between GlobalData and EasyJet is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding GlobalData PLC and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC and GlobalData PLC 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 GlobalData PLC are associated (or correlated) with EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of GlobalData PLC i.e., GlobalData PLC and EasyJet PLC go up and down completely randomly.

Pair Corralation between GlobalData PLC and EasyJet PLC

Assuming the 90 days trading horizon GlobalData PLC is expected to generate 1.21 times more return on investment than EasyJet PLC. However, GlobalData PLC is 1.21 times more volatile than EasyJet PLC. It trades about 0.01 of its potential returns per unit of risk. EasyJet PLC is currently generating about 0.0 per unit of risk. If you would invest  18,300  in GlobalData PLC on October 23, 2024 and sell it today you would earn a total of  50.00  from holding GlobalData PLC or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

GlobalData PLC  vs.  EasyJet PLC

GlobalData PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GlobalData PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GlobalData PLC is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

EasyJet PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EasyJet PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, EasyJet PLC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GlobalData PLC and EasyJet PLC

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

The idea behind GlobalData PLC and EasyJet 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.