Correlation Between Informa PLC and Sage Group

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

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

Diversification Opportunities for Informa PLC and Sage Group

0.69

Correlation Coefficient

Informa PLC  Sage Group

Poor diversification

The 3 months correlation between Informa and Sage is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Informa PLC ADR and Sage Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Group PLC 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 ADR are associated (or correlated) with Sage Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Group PLC has no effect on the direction of Informa PLC i.e., Informa PLC and Sage Group go up and down completely randomly.

Pair Corralation between Informa PLC and Sage Group

Assuming the 90 days horizon Informa PLC ADR is expected to generate 1.94 times more return on investment than Sage Group. However, Informa PLC is 1.94 times more volatile than Sage Group PLC. It trades about 0.05 of its potential returns per unit of risk. Sage Group PLC is currently generating about -0.02 per unit of risk. If you would invest  1,997  in Informa PLC ADR on December 29, 2024 and sell it today you would earn a total of  115.00  from holding Informa PLC ADR or generate 5.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Informa PLC ADR  vs.  Sage Group PLC

Informa PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Informa PLC ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Informa PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Sage Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sage Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sage Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Informa PLC and Sage Group

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

The idea behind Informa PLC ADR and Sage Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.