Correlation Between EasyJet PLC and Balfour Beatty

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

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

Diversification Opportunities for EasyJet PLC and Balfour Beatty

0.78

Correlation Coefficient

EasyJet PLC  Balfour Beatty

Poor diversification

The 3 months correlation between EasyJet and Balfour is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding EasyJet PLC and Balfour Beatty plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balfour Beatty plc and EasyJet 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 EasyJet PLC are associated (or correlated) with Balfour Beatty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balfour Beatty plc has no effect on the direction of EasyJet PLC i.e., EasyJet PLC and Balfour Beatty go up and down completely randomly.

Pair Corralation between EasyJet PLC and Balfour Beatty

Assuming the 90 days trading horizon EasyJet PLC is expected to generate 1.3 times more return on investment than Balfour Beatty. However, EasyJet PLC is 1.3 times more volatile than Balfour Beatty plc. It trades about 0.15 of its potential returns per unit of risk. Balfour Beatty plc is currently generating about 0.06 per unit of risk. If you would invest  52,040  in EasyJet PLC on September 26, 2024 and sell it today you would earn a total of  5,300  from holding EasyJet PLC or generate 10.18% return on investment over 90 days.

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

EasyJet PLC  vs.  Balfour Beatty plc

EasyJet PLC

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EasyJet PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, EasyJet PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Balfour Beatty plc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Balfour Beatty plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Balfour Beatty is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EasyJet PLC and Balfour Beatty

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

The idea behind EasyJet PLC and Balfour Beatty 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.