Correlation Between Pearson PLC and John Wiley

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

Diversification Opportunities for Pearson PLC and John Wiley

0.27

Correlation Coefficient

Pearson PLC  John Wiley

Modest diversification

The 3 months correlation between Pearson and John is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Pearson PLC ADR and John Wiley Sons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Wiley Sons 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 John Wiley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Wiley Sons has no effect on the direction of Pearson PLC i.e., Pearson PLC and John Wiley go up and down completely randomly.

Pair Corralation between Pearson PLC and John Wiley

Considering the 90-day investment horizon Pearson PLC ADR is expected to generate 0.71 times more return on investment than John Wiley. However, Pearson PLC ADR is 1.41 times less risky than John Wiley. It trades about -0.05 of its potential returns per unit of risk. John Wiley Sons is currently generating about -0.1 per unit of risk. If you would invest  1,582  in Pearson PLC ADR on May 7, 2025 and sell it today you would lose (85.00) from holding Pearson PLC ADR or give up 5.37% of portfolio value over 90 days.

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

Pearson PLC ADR  vs.  John Wiley Sons

Pearson PLC ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pearson PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Pearson PLC is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

John Wiley Sons

Risk-Adjusted Performance

Very Weak

Over the last 90 days John Wiley Sons has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in September 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Pearson PLC and John Wiley

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

The idea behind Pearson PLC ADR and John Wiley Sons 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 Transaction History module to view history of all your transactions and understand their impact on performance.