Correlation Between Global Payments and Experian Plc

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

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

Diversification Opportunities for Global Payments and Experian Plc

0.26

Correlation Coefficient

Global Payments  Experian Plc

Modest diversification

The 3 months correlation between Global and Experian is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and Experian plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Experian plc and Global Payments 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 Global Payments 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 Global Payments i.e., Global Payments and Experian Plc go up and down completely randomly.

Pair Corralation between Global Payments and Experian Plc

Assuming the 90 days horizon Global Payments is expected to under-perform the Experian Plc. In addition to that, Global Payments is 1.12 times more volatile than Experian plc. It trades about -0.12 of its total potential returns per unit of risk. Experian plc is currently generating about 0.04 per unit of volatility. If you would invest  4,121  in Experian plc on December 30, 2024 and sell it today you would earn a total of  139.00  from holding Experian plc or generate 3.37% return on investment over 90 days.

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

Global Payments  vs.  Experian plc

Global Payments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Payments 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 basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Experian plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Experian plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Experian Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Global Payments and Experian Plc

The main advantage of trading using opposite Global Payments and Experian Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Payments 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 Global Payments 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.