Correlation Between Legible and Informa PLC

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

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

Diversification Opportunities for Legible and Informa PLC

-0.17

Correlation Coefficient

Legible  Informa PLC

Good diversification

The 3 months correlation between Legible and Informa is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Legible and Informa PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Informa PLC ADR and Legible 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 Legible are associated (or correlated) with Informa PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Informa PLC ADR has no effect on the direction of Legible i.e., Legible and Informa PLC go up and down completely randomly.

Pair Corralation between Legible and Informa PLC

Assuming the 90 days horizon Legible is expected to generate 5.19 times more return on investment than Informa PLC. However, Legible is 5.19 times more volatile than Informa PLC ADR. It trades about 0.03 of its potential returns per unit of risk. Informa PLC ADR is currently generating about 0.05 per unit of risk. If you would invest  3.00  in Legible on December 30, 2024 and sell it today you would lose (0.56) from holding Legible or give up 18.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Legible  vs.  Informa PLC ADR

Legible

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Legible are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Legible reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Legible and Informa PLC

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

The idea behind Legible and Informa 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.