Correlation Between Experian Plc and SGS SA

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

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

Diversification Opportunities for Experian Plc and SGS SA

-0.27

Correlation Coefficient

Experian Plc  SGS SA

Very good diversification

The 3 months correlation between Experian and SGS is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Experian plc PK and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and Experian 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 Experian plc PK are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Experian Plc i.e., Experian Plc and SGS SA go up and down completely randomly.

Pair Corralation between Experian Plc and SGS SA

Assuming the 90 days horizon Experian plc PK is expected to under-perform the SGS SA. But the otc stock apears to be less risky and, when comparing its historical volatility, Experian plc PK is 1.25 times less risky than SGS SA. The otc stock trades about -0.09 of its potential returns per unit of risk. The SGS SA is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  9,693  in SGS SA on December 4, 2024 and sell it today you would earn a total of  1,032  from holding SGS SA or generate 10.65% return on investment over 90 days.

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

Experian plc PK  vs.  SGS SA

Experian plc PK

Risk-Adjusted Performance

Very Weak

Over the last 90 days Experian plc PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Experian Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

SGS SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SGS SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, SGS SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Experian Plc and SGS SA

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

The idea behind Experian plc PK and SGS SA 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.