Correlation Between Magna International and Relx PLC
Can any of the company-specific risk be diversified away by investing in both Magna International 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 Magna International and Relx PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magna International and Relx PLC ADR, you can compare the effects of market volatilities on Magna International 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 Magna International with a short position of Relx PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Relx PLC.
Diversification Opportunities for Magna International and Relx PLC
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Magna and Relx is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Magna International and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR and Magna International 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 Magna International 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 ADR has no effect on the direction of Magna International i.e., Magna International and Relx PLC go up and down completely randomly.
Pair Corralation between Magna International and Relx PLC
Considering the 90-day investment horizon Magna International is expected to under-perform the Relx PLC. In addition to that, Magna International is 1.61 times more volatile than Relx PLC ADR. It trades about -0.16 of its total potential returns per unit of risk. Relx PLC ADR is currently generating about 0.13 per unit of volatility. If you would invest 4,540 in Relx PLC ADR on November 30, 2024 and sell it today you would earn a total of 297.00 from holding Relx PLC ADR or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Relx PLC ADR
Performance |
| Timeline |
| Magna International |
| Relx PLC ADR |
Magna International and Relx PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Relx PLC
The main advantage of trading using opposite Magna International and Relx PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Relx PLC vs. Maximus | Relx PLC vs. CBIZ Inc | Relx PLC vs. First Advantage Corp | Relx PLC vs. Network 1 Technologies |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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