Correlation Between Pearson PLC and Agape ATP

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

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

Diversification Opportunities for Pearson PLC and Agape ATP

-0.54

Correlation Coefficient

Pearson PLC  Agape ATP

Excellent diversification

The 3 months correlation between Pearson and Agape is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pearson PLC ADR and Agape ATP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agape ATP 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 ADR are associated (or correlated) with Agape ATP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agape ATP has no effect on the direction of Pearson PLC i.e., Pearson PLC and Agape ATP go up and down completely randomly.

Pair Corralation between Pearson PLC and Agape ATP

Considering the 90-day investment horizon Pearson PLC is expected to generate 8.36 times less return on investment than Agape ATP. But when comparing it to its historical volatility, Pearson PLC ADR is 10.38 times less risky than Agape ATP. It trades about 0.05 of its potential returns per unit of risk. Agape ATP is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  119.00  in Agape ATP on December 19, 2024 and sell it today you would lose (16.00) from holding Agape ATP or give up 13.45% of portfolio value over 90 days.

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

Pearson PLC ADR  vs.  Agape ATP

Pearson PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Pearson PLC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Agape ATP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Agape ATP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Agape ATP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pearson PLC and Agape ATP

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

The idea behind Pearson PLC ADR and Agape ATP 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.