Correlation Between Relx PLC and JD Sports

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

Diversification Opportunities for Relx PLC and JD Sports

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Relx and JDSPY is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Relx PLC i.e., Relx PLC and JD Sports go up and down completely randomly.

Pair Corralation between Relx PLC and JD Sports

Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.24 times more return on investment than JD Sports. However, Relx PLC ADR is 4.19 times less risky than JD Sports. It trades about 0.11 of its potential returns per unit of risk. JD Sports Fashion is currently generating about 0.01 per unit of risk. If you would invest  2,769  in Relx PLC ADR on September 2, 2024 and sell it today you would earn a total of  1,939  from holding Relx PLC ADR or generate 70.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Relx PLC ADR  vs.  JD Sports Fashion

 Performance 
       Timeline  
Relx PLC ADR 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Relx PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.
JD Sports Fashion 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Relx PLC and JD Sports Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Relx PLC and JD Sports

The main advantage of trading using opposite Relx PLC and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.
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The idea behind Relx PLC ADR and JD Sports Fashion 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 Stocks Directory module to find actively traded stocks across global markets.

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