Correlation Between Akzo Nobel and Relx PLC
Can any of the company-specific risk be diversified away by investing in both Akzo Nobel and Relx 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 Akzo Nobel and Relx PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Akzo Nobel NV and Relx PLC, you can compare the effects of market volatilities on Akzo Nobel and Relx 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 Akzo Nobel with a short position of Relx PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akzo Nobel and Relx PLC.
Diversification Opportunities for Akzo Nobel and Relx PLC
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Akzo and Relx is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Akzo Nobel NV and Relx PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC and Akzo Nobel 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 Akzo Nobel NV are associated (or correlated) with Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC has no effect on the direction of Akzo Nobel i.e., Akzo Nobel and Relx PLC go up and down completely randomly.
Pair Corralation between Akzo Nobel and Relx PLC
Assuming the 90 days trading horizon Akzo Nobel NV is expected to under-perform the Relx PLC. In addition to that, Akzo Nobel is 1.29 times more volatile than Relx PLC. It trades about -0.07 of its total potential returns per unit of risk. Relx PLC is currently generating about 0.07 per unit of volatility. If you would invest 4,076 in Relx PLC on September 2, 2024 and sell it today you would earn a total of 382.00 from holding Relx PLC or generate 9.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Akzo Nobel NV vs. Relx PLC
Performance |
| Timeline |
| Akzo Nobel NV |
| Relx PLC |
Akzo Nobel and Relx PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Akzo Nobel and Relx PLC
The main advantage of trading using opposite Akzo Nobel and Relx PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akzo Nobel position performs unexpectedly, Relx 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 Relx PLC will offset losses from the drop in Relx PLC's long position.| Akzo Nobel vs. Randstad NV | Akzo Nobel vs. Koninklijke Philips NV | Akzo Nobel vs. Koninklijke KPN NV | Akzo Nobel vs. Aegon NV |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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