Correlation Between Relx PLC and Sumitomo Mitsui
Can any of the company-specific risk be diversified away by investing in both Relx PLC and Sumitomo Mitsui 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 Sumitomo Mitsui into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Relx PLC ADR and Sumitomo Mitsui Construction, you can compare the effects of market volatilities on Relx PLC and Sumitomo Mitsui 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 Sumitomo Mitsui. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Sumitomo Mitsui.
Diversification Opportunities for Relx PLC and Sumitomo Mitsui
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Relx and Sumitomo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Sumitomo Mitsui Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Mitsui Cons 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 ADR are associated (or correlated) with Sumitomo Mitsui. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Mitsui Cons has no effect on the direction of Relx PLC i.e., Relx PLC and Sumitomo Mitsui go up and down completely randomly.
Pair Corralation between Relx PLC and Sumitomo Mitsui
Assuming the 90 days trading horizon Relx PLC ADR is expected to generate 0.76 times more return on investment than Sumitomo Mitsui. However, Relx PLC ADR is 1.31 times less risky than Sumitomo Mitsui. It trades about 0.1 of its potential returns per unit of risk. Sumitomo Mitsui Construction is currently generating about -0.02 per unit of risk. If you would invest 2,568 in Relx PLC ADR on October 17, 2024 and sell it today you would earn a total of 1,892 from holding Relx PLC ADR or generate 73.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Relx PLC ADR vs. Sumitomo Mitsui Construction
Performance |
| Timeline |
| Relx PLC ADR |
| Sumitomo Mitsui Cons |
Relx PLC and Sumitomo Mitsui Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Relx PLC and Sumitomo Mitsui
The main advantage of trading using opposite Relx PLC and Sumitomo Mitsui positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC position performs unexpectedly, Sumitomo Mitsui 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 Sumitomo Mitsui will offset losses from the drop in Sumitomo Mitsui's long position.| Relx PLC vs. FIH MOBILE | Relx PLC vs. Synovus Financial Corp | Relx PLC vs. BANKINTER ADR 2007 | Relx PLC vs. SOCKET MOBILE NEW |
| Sumitomo Mitsui vs. InPlay Oil Corp | Sumitomo Mitsui vs. Nippon Light Metal | Sumitomo Mitsui vs. ANTA SPORTS PRODUCT | Sumitomo Mitsui vs. JD SPORTS FASH |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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