Correlation Between RELX PLC and Pearson Plc
Can any of the company-specific risk be diversified away by investing in both RELX PLC and Pearson 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 RELX PLC and Pearson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RELX PLC and Pearson plc, you can compare the effects of market volatilities on RELX PLC and Pearson 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 RELX PLC with a short position of Pearson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of RELX PLC and Pearson Plc.
Diversification Opportunities for RELX PLC and Pearson Plc
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RELX and Pearson is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding RELX PLC and Pearson plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearson plc and RELX 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 RELX PLC are associated (or correlated) with Pearson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearson plc has no effect on the direction of RELX PLC i.e., RELX PLC and Pearson Plc go up and down completely randomly.
Pair Corralation between RELX PLC and Pearson Plc
Assuming the 90 days trading horizon RELX PLC is expected to generate 1.11 times less return on investment than Pearson Plc. In addition to that, RELX PLC is 1.06 times more volatile than Pearson plc. It trades about 0.08 of its total potential returns per unit of risk. Pearson plc is currently generating about 0.09 per unit of volatility. If you would invest 1,534 in Pearson plc on October 15, 2024 and sell it today you would earn a total of 20.00 from holding Pearson plc or generate 1.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RELX PLC vs. Pearson plc
Performance |
| Timeline |
| RELX PLC |
| Pearson plc |
RELX PLC and Pearson Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RELX PLC and Pearson Plc
The main advantage of trading using opposite RELX PLC and Pearson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RELX PLC position performs unexpectedly, Pearson 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 Pearson Plc will offset losses from the drop in Pearson Plc's long position.| RELX PLC vs. Highlight Communications AG | RELX PLC vs. TELECOM ITALIA | RELX PLC vs. Chengdu PUTIAN Telecommunications | RELX PLC vs. Nordic Semiconductor ASA |
| Pearson Plc vs. MEDCAW INVESTMENTS LS 01 | Pearson Plc vs. American Public Education | Pearson Plc vs. Perdoceo Education | Pearson Plc vs. Laureate Education |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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