Correlation Between First Horizon and Relx PLC

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

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

Diversification Opportunities for First Horizon and Relx PLC

-0.04

Correlation Coefficient

First Horizon  Relx PLC

Good diversification

The 3 months correlation between First and Relx is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Horizon 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 First Horizon 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 First Horizon 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 First Horizon i.e., First Horizon and Relx PLC go up and down completely randomly.

Pair Corralation between First Horizon and Relx PLC

Assuming the 90 days trading horizon First Horizon is expected to generate 0.29 times more return on investment than Relx PLC. However, First Horizon is 3.4 times less risky than Relx PLC. It trades about 0.15 of its potential returns per unit of risk. Relx PLC ADR is currently generating about 0.04 per unit of risk. If you would invest  2,510  in First Horizon on September 5, 2024 and sell it today you would earn a total of  31.00  from holding First Horizon or generate 1.24% return on investment over 90 days.

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

First Horizon  vs.  Relx PLC ADR

First Horizon

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Horizon are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, First Horizon is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Relx PLC ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC ADR are ranked lower than 4 (%) 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 First Horizon and Relx PLC

The main advantage of trading using opposite First Horizon and Relx PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Horizon 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 First Horizon 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.