Correlation Between Informa PLC and NTT DATA

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

By analyzing existing cross correlation between Informa PLC and NTT DATA , you can compare the effects of market volatilities on Informa PLC and NTT DATA 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 NTT DATA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Informa PLC and NTT DATA.

Diversification Opportunities for Informa PLC and NTT DATA

0.43

Correlation Coefficient

Informa PLC  NTT DATA

Very weak diversification

The 3 months correlation between Informa and NTT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Informa PLC and NTT DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NTT DATA 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 NTT DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NTT DATA has no effect on the direction of Informa PLC i.e., Informa PLC and NTT DATA go up and down completely randomly.

Pair Corralation between Informa PLC and NTT DATA

Assuming the 90 days horizon Informa PLC is expected to under-perform the NTT DATA. But the stock apears to be less risky and, when comparing its historical volatility, Informa PLC is 1.61 times less risky than NTT DATA. The stock trades about -0.31 of its potential returns per unit of risk. The NTT DATA is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,900  in NTT DATA on October 8, 2024 and sell it today you would lose (50.00) from holding NTT DATA or give up 2.63% of portfolio value over 90 days.

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

Informa PLC  vs.  NTT DATA

Informa PLC

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Informa PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

NTT DATA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NTT DATA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, NTT DATA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Informa PLC and NTT DATA

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

The idea behind Informa PLC and NTT DATA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.