Correlation Between Pearson PLC and Hellenic Telecommunicatio

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

Diversification Opportunities for Pearson PLC and Hellenic Telecommunicatio

-0.85

Correlation Coefficient

Pearson PLC  Hellenic Telecommunicatio

Pay attention - limited upside

The 3 months correlation between Pearson and Hellenic is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Pearson PLC ADR and Hellenic Telecommunications Or in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hellenic Telecommunicatio 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 Hellenic Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hellenic Telecommunicatio has no effect on the direction of Pearson PLC i.e., Pearson PLC and Hellenic Telecommunicatio go up and down completely randomly.

Pair Corralation between Pearson PLC and Hellenic Telecommunicatio

Considering the 90-day investment horizon Pearson PLC ADR is expected to generate 0.49 times more return on investment than Hellenic Telecommunicatio. However, Pearson PLC ADR is 2.06 times less risky than Hellenic Telecommunicatio. It trades about 0.09 of its potential returns per unit of risk. Hellenic Telecommunications Org is currently generating about 0.03 per unit of risk. If you would invest  958.00  in Pearson PLC ADR on October 5, 2024 and sell it today you would earn a total of  641.00  from holding Pearson PLC ADR or generate 66.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.78%
Values	Daily Returns

Pearson PLC ADR  vs.  Hellenic Telecommunications Or

Pearson PLC ADR

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pearson PLC ADR are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pearson PLC displayed solid returns over the last few months and may actually be approaching a breakup point.

Hellenic Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hellenic Telecommunications Org has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Pearson PLC and Hellenic Telecommunicatio

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

The idea behind Pearson PLC ADR and Hellenic Telecommunications Org 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.