Correlation Between Pearson PLC and Gannett

Can any of the company-specific risk be diversified away by investing in both Pearson PLC and Gannett 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 Gannett 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 Gannett Co, you can compare the effects of market volatilities on Pearson PLC and Gannett 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 Gannett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pearson PLC and Gannett.

Diversification Opportunities for Pearson PLC and Gannett

-0.19

Correlation Coefficient

Pearson PLC  Gannett

Good diversification

The 3 months correlation between Pearson and Gannett is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Pearson PLC ADR and Gannett Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gannett 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 Gannett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gannett has no effect on the direction of Pearson PLC i.e., Pearson PLC and Gannett go up and down completely randomly.

Pair Corralation between Pearson PLC and Gannett

Considering the 90-day investment horizon Pearson PLC ADR is expected to generate 0.25 times more return on investment than Gannett. However, Pearson PLC ADR is 4.02 times less risky than Gannett. It trades about 0.17 of its potential returns per unit of risk. Gannett Co is currently generating about 0.04 per unit of risk. If you would invest  1,393  in Pearson PLC ADR on September 2, 2024 and sell it today you would earn a total of  170.00  from holding Pearson PLC ADR or generate 12.2% return on investment over 90 days.

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

Pearson PLC ADR  vs.  Gannett Co

Pearson PLC ADR

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pearson PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Gannett

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Gannett Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Gannett may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pearson PLC and Gannett

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

The idea behind Pearson PLC ADR and Gannett Co 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..