Correlation Between Equifax and Experian PLC

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

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

Diversification Opportunities for Equifax and Experian PLC

0.7

Correlation Coefficient

Equifax  Experian PLC

Poor diversification

The 3 months correlation between Equifax and Experian is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Equifax and Experian PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Experian PLC and Equifax 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 Equifax are associated (or correlated) with Experian PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Experian PLC has no effect on the direction of Equifax i.e., Equifax and Experian PLC go up and down completely randomly.

Pair Corralation between Equifax and Experian PLC

Considering the 90-day investment horizon Equifax is expected to generate 1.38 times more return on investment than Experian PLC. However, Equifax is 1.38 times more volatile than Experian PLC. It trades about -0.15 of its potential returns per unit of risk. Experian PLC is currently generating about -0.31 per unit of risk. If you would invest  26,274  in Equifax on October 12, 2024 and sell it today you would lose (1,463) from holding Equifax or give up 5.57% of portfolio value over 90 days.

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

Equifax  vs.  Experian PLC

Equifax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equifax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Experian PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Experian PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with Equifax and Experian PLC

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

The idea behind Equifax and Experian 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.