Correlation Between 3i Group and Partners

Can any of the company-specific risk be diversified away by investing in both 3i Group and Partners 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 3i Group and Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3i Group plc and Partners Group, you can compare the effects of market volatilities on 3i Group and Partners 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 3i Group with a short position of Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3i Group and Partners.

Diversification Opportunities for 3i Group and Partners

0.77

Correlation Coefficient

3i Group  Partners

Poor diversification

The 3 months correlation between TGOPF and Partners is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding 3i Group plc and Partners Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Partners Group and 3i Group 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 3i Group plc are associated (or correlated) with Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Partners Group has no effect on the direction of 3i Group i.e., 3i Group and Partners go up and down completely randomly.

Pair Corralation between 3i Group and Partners

Assuming the 90 days horizon 3i Group is expected to generate 1.5 times less return on investment than Partners. But when comparing it to its historical volatility, 3i Group plc is 1.01 times less risky than Partners. It trades about 0.06 of its potential returns per unit of risk. Partners Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  133,733  in Partners Group on December 29, 2024 and sell it today you would earn a total of  14,738  from holding Partners Group or generate 11.02% return on investment over 90 days.

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

3i Group plc  vs.  Partners Group

3i Group plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 3i Group plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 3i Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Partners Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Partners Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Partners may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with 3i Group and Partners

The main advantage of trading using opposite 3i Group and Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3i Group position performs unexpectedly, Partners 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 Partners will offset losses from the drop in Partners' long position.

The idea behind 3i Group plc and Partners Group 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.