Correlation Between FTI Consulting and Relx PLC

Can any of the company-specific risk be diversified away by investing in both FTI Consulting and Relx 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 FTI Consulting and Relx PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FTI Consulting and Relx PLC ADR, you can compare the effects of market volatilities on FTI Consulting and Relx 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 FTI Consulting with a short position of Relx PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of FTI Consulting and Relx PLC.

Diversification Opportunities for FTI Consulting and Relx PLC

0.42

Correlation Coefficient

FTI Consulting  Relx PLC

Very weak diversification

The 3 months correlation between FTI and Relx is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding FTI Consulting and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR and FTI Consulting 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 FTI Consulting are associated (or correlated) with Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of FTI Consulting i.e., FTI Consulting and Relx PLC go up and down completely randomly.

Pair Corralation between FTI Consulting and Relx PLC

Considering the 90-day investment horizon FTI Consulting is expected to under-perform the Relx PLC. In addition to that, FTI Consulting is 1.6 times more volatile than Relx PLC ADR. It trades about -0.08 of its total potential returns per unit of risk. Relx PLC ADR is currently generating about 0.03 per unit of volatility. If you would invest  4,668  in Relx PLC ADR on September 4, 2024 and sell it today you would earn a total of  80.00  from holding Relx PLC ADR or generate 1.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

FTI Consulting  vs.  Relx PLC ADR

FTI Consulting

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FTI Consulting has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Relx PLC ADR

Risk-Adjusted Performance

2 of 100

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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FTI Consulting and Relx PLC

The main advantage of trading using opposite FTI Consulting and Relx PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FTI Consulting position performs unexpectedly, Relx 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 Relx PLC will offset losses from the drop in Relx PLC's long position.

The idea behind FTI Consulting and Relx PLC ADR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.