Correlation Between Global Payments and Thomson Reuters

Can any of the company-specific risk be diversified away by investing in both Global Payments and Thomson Reuters 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 Global Payments and Thomson Reuters into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Payments and Thomson Reuters Corp, you can compare the effects of market volatilities on Global Payments and Thomson Reuters 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 Global Payments with a short position of Thomson Reuters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Payments and Thomson Reuters.

Diversification Opportunities for Global Payments and Thomson Reuters

-0.49

Correlation Coefficient

Global Payments  Thomson Reuters

Very good diversification

The 3 months correlation between Global and Thomson is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Global Payments and Thomson Reuters Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomson Reuters Corp and Global Payments 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 Global Payments are associated (or correlated) with Thomson Reuters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomson Reuters Corp has no effect on the direction of Global Payments i.e., Global Payments and Thomson Reuters go up and down completely randomly.

Pair Corralation between Global Payments and Thomson Reuters

Considering the 90-day investment horizon Global Payments is expected to generate 3.89 times less return on investment than Thomson Reuters. In addition to that, Global Payments is 1.39 times more volatile than Thomson Reuters Corp. It trades about 0.02 of its total potential returns per unit of risk. Thomson Reuters Corp is currently generating about 0.12 per unit of volatility. If you would invest  11,991  in Thomson Reuters Corp on February 16, 2024 and sell it today you would earn a total of  4,987  from holding Thomson Reuters Corp or generate 41.59% return on investment over 90 days.

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

Global Payments  vs.  Thomson Reuters Corp

Global Payments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Payments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Thomson Reuters Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Thomson Reuters Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Thomson Reuters is not utilizing all of its potentials. The newest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Global Payments and Thomson Reuters

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

The idea behind Global Payments and Thomson Reuters Corp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.