Correlation Between Relx PLC and Performant Financial
Can any of the company-specific risk be diversified away by investing in both Relx PLC and Performant Financial 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 Performant Financial 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 Performant Financial, you can compare the effects of market volatilities on Relx PLC and Performant Financial 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 Performant Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Performant Financial.
Diversification Opportunities for Relx PLC and Performant Financial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Relx and Performant is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Performant Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Performant Financial 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 Performant Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Performant Financial has no effect on the direction of Relx PLC i.e., Relx PLC and Performant Financial go up and down completely randomly.
Pair Corralation between Relx PLC and Performant Financial
Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.3 times more return on investment than Performant Financial. However, Relx PLC ADR is 3.32 times less risky than Performant Financial. It trades about -0.07 of its potential returns per unit of risk. Performant Financial is currently generating about -0.19 per unit of risk. If you would invest 4,791 in Relx PLC ADR on August 30, 2024 and sell it today you would lose (110.00) from holding Relx PLC ADR or give up 2.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Relx PLC ADR vs. Performant Financial
Performance |
| Timeline |
| Relx PLC ADR |
| Performant Financial |
Relx PLC and Performant Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Relx PLC and Performant Financial
The main advantage of trading using opposite Relx PLC and Performant Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC position performs unexpectedly, Performant Financial 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 Performant Financial will offset losses from the drop in Performant Financial's long position.| Relx PLC vs. Maximus | Relx PLC vs. CBIZ Inc | Relx PLC vs. First Advantage Corp | Relx PLC vs. Network 1 Technologies |
| Performant Financial vs. Network 1 Technologies | Performant Financial vs. Rentokil Initial PLC | Performant Financial vs. Wilhelmina | Performant Financial vs. Mader Group Limited |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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