Correlation Between United States and Informa PLC

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

By analyzing existing cross correlation between United States Steel and Informa PLC, you can compare the effects of market volatilities on United States and Informa PLC 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 United States with a short position of Informa PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Informa PLC.

Diversification Opportunities for United States and Informa PLC

0.57

Correlation Coefficient

United States  Informa PLC

Very weak diversification

The 3 months correlation between United and Informa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Informa PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Informa PLC and United States 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 United States Steel are associated (or correlated) with Informa PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Informa PLC has no effect on the direction of United States i.e., United States and Informa PLC go up and down completely randomly.

Pair Corralation between United States and Informa PLC

Assuming the 90 days trading horizon United States Steel is expected to under-perform the Informa PLC. In addition to that, United States is 2.51 times more volatile than Informa PLC. It trades about -0.48 of its total potential returns per unit of risk. Informa PLC is currently generating about -0.42 per unit of volatility. If you would invest  1,060  in Informa PLC on September 28, 2024 and sell it today you would lose (95.00) from holding Informa PLC or give up 8.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

United States Steel  vs.  Informa PLC

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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.

Informa PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with United States and Informa PLC

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

The idea behind United States Steel and Informa PLC 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.