Correlation Between Pearson Plc and Xinhua Winshare

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

By analyzing existing cross correlation between Pearson plc and Xinhua Winshare Publishing, you can compare the effects of market volatilities on Pearson Plc and Xinhua Winshare 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 Pearson Plc with a short position of Xinhua Winshare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pearson Plc and Xinhua Winshare.

Diversification Opportunities for Pearson Plc and Xinhua Winshare

-0.04

Correlation Coefficient

Pearson Plc  Xinhua Winshare

Good diversification

The 3 months correlation between Pearson and Xinhua is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Pearson plc and Xinhua Winshare Publishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xinhua Winshare Publ and Pearson 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 Pearson plc are associated (or correlated) with Xinhua Winshare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xinhua Winshare Publ has no effect on the direction of Pearson Plc i.e., Pearson Plc and Xinhua Winshare go up and down completely randomly.

Pair Corralation between Pearson Plc and Xinhua Winshare

Assuming the 90 days horizon Pearson plc is expected to generate 0.72 times more return on investment than Xinhua Winshare. However, Pearson plc is 1.38 times less risky than Xinhua Winshare. It trades about -0.01 of its potential returns per unit of risk. Xinhua Winshare Publishing is currently generating about -0.09 per unit of risk. If you would invest  1,526  in Pearson plc on December 21, 2024 and sell it today you would lose (24.00) from holding Pearson plc or give up 1.57% of portfolio value over 90 days.

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

Pearson plc  vs.  Xinhua Winshare Publishing

Pearson plc

Risk-Adjusted Performance

Very Weak

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

Xinhua Winshare Publ

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xinhua Winshare Publishing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pearson Plc and Xinhua Winshare

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

The idea behind Pearson plc and Xinhua Winshare Publishing 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.