Correlation Between Marks and EasyJet PLC

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

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

Diversification Opportunities for Marks and EasyJet PLC

0.64

Correlation Coefficient

Marks  EasyJet PLC

Poor diversification

The 3 months correlation between Marks and EasyJet is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Marks and Spencer and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC and Marks 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 Marks and Spencer are associated (or correlated) with EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Marks i.e., Marks and EasyJet PLC go up and down completely randomly.

Pair Corralation between Marks and EasyJet PLC

Assuming the 90 days trading horizon Marks and Spencer is expected to generate 0.8 times more return on investment than EasyJet PLC. However, Marks and Spencer is 1.26 times less risky than EasyJet PLC. It trades about 0.11 of its potential returns per unit of risk. EasyJet PLC is currently generating about 0.07 per unit of risk. If you would invest  24,978  in Marks and Spencer on September 23, 2024 and sell it today you would earn a total of  12,962  from holding Marks and Spencer or generate 51.89% return on investment over 90 days.

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

Marks and Spencer  vs.  EasyJet PLC

Marks and Spencer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marks and Spencer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Marks is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

EasyJet PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EasyJet PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, EasyJet PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Marks and EasyJet PLC

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

The idea behind Marks and Spencer and EasyJet 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.