Correlation Between Greenfire Resources and Pearson PLC

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Can any of the company-specific risk be diversified away by investing in both Greenfire Resources 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 Greenfire Resources and Pearson PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Greenfire Resources and Pearson PLC ADR, you can compare the effects of market volatilities on Greenfire Resources 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 Greenfire Resources with a short position of Pearson PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Greenfire Resources and Pearson PLC.

Diversification Opportunities for Greenfire Resources and Pearson PLC

GreenfirePearsonDiversified AwayGreenfirePearsonDiversified Away100%
-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Greenfire and Pearson is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Greenfire Resources and Pearson PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson PLC ADR and Greenfire Resources 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 Greenfire Resources 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 ADR has no effect on the direction of Greenfire Resources i.e., Greenfire Resources and Pearson PLC go up and down completely randomly.

Pair Corralation between Greenfire Resources and Pearson PLC

Considering the 90-day investment horizon Greenfire Resources is expected to under-perform the Pearson PLC. In addition to that, Greenfire Resources is 2.04 times more volatile than Pearson PLC ADR. It trades about -0.07 of its total potential returns per unit of risk. Pearson PLC ADR is currently generating about 0.19 per unit of volatility. If you would invest  1,511  in Pearson PLC ADR on November 21, 2024 and sell it today you would earn a total of  204.00  from holding Pearson PLC ADR or generate 13.5% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Greenfire Resources  vs.  Pearson PLC ADR

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-5051015
JavaScript chart by amCharts 3.21.15GFR PSO
       Timeline  
Greenfire Resources 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Greenfire Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb66.577.5
Pearson PLC ADR 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pearson PLC displayed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb1515.51616.517

Greenfire Resources and Pearson PLC Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.03-3.02-2.01-1.00.00.941.892.833.78 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15GFR PSO
       Returns  

Pair Trading with Greenfire Resources and Pearson PLC

The main advantage of trading using opposite Greenfire Resources and Pearson PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Greenfire Resources 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 Greenfire Resources and Pearson PLC ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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