Correlation Between Relx PLC and Magna International
Can any of the company-specific risk be diversified away by investing in both Relx PLC and Magna International 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 Magna International 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 Magna International, you can compare the effects of market volatilities on Relx PLC and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Magna International.
Diversification Opportunities for Relx PLC and Magna International
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Relx and Magna is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of Relx PLC i.e., Relx PLC and Magna International go up and down completely randomly.
Pair Corralation between Relx PLC and Magna International
Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.56 times more return on investment than Magna International. However, Relx PLC ADR is 1.78 times less risky than Magna International. It trades about 0.07 of its potential returns per unit of risk. Magna International is currently generating about 0.01 per unit of risk. If you would invest 4,220 in Relx PLC ADR on September 3, 2024 and sell it today you would earn a total of 488.00 from holding Relx PLC ADR or generate 11.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Relx PLC ADR vs. Magna International
Performance |
| Timeline |
| Relx PLC ADR |
| Magna International |
Relx PLC and Magna International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Relx PLC and Magna International
The main advantage of trading using opposite Relx PLC and Magna International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC position performs unexpectedly, Magna International 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 Magna International will offset losses from the drop in Magna International's long position.| Relx PLC vs. Maximus | Relx PLC vs. CBIZ Inc | Relx PLC vs. First Advantage Corp | Relx PLC vs. Network 1 Technologies |
| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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