Correlation Between Informa PLC and Peijia Medical

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

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

Diversification Opportunities for Informa PLC and Peijia Medical

-0.25

Correlation Coefficient

Informa PLC  Peijia Medical

Very good diversification

The 3 months correlation between Informa and Peijia is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Informa PLC and Peijia Medical Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peijia Medical and Informa 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 Informa PLC are associated (or correlated) with Peijia Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peijia Medical has no effect on the direction of Informa PLC i.e., Informa PLC and Peijia Medical go up and down completely randomly.

Pair Corralation between Informa PLC and Peijia Medical

Assuming the 90 days horizon Informa PLC is expected to under-perform the Peijia Medical. But the stock apears to be less risky and, when comparing its historical volatility, Informa PLC is 2.07 times less risky than Peijia Medical. The stock trades about -0.04 of its potential returns per unit of risk. The Peijia Medical Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  45.00  in Peijia Medical Limited on December 20, 2024 and sell it today you would earn a total of  11.00  from holding Peijia Medical Limited or generate 24.44% return on investment over 90 days.

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

Informa PLC  vs.  Peijia Medical Limited

Informa PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Informa PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Informa PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Peijia Medical

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Peijia Medical Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Peijia Medical reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Informa PLC and Peijia Medical

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

The idea behind Informa PLC and Peijia Medical Limited 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.