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

-0.15

Correlation Coefficient

Relx PLC  Magna International

Good diversification

The 3 months correlation between Relx and Magna is -0.15. 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 0.57 times more return on investment than Magna International. However, Relx PLC ADR is 1.75 times less risky than Magna International. It trades about 0.05 of its potential returns per unit of risk. Magna International is currently generating about -0.04 per unit of risk. If you would invest  4,267  in Relx PLC ADR on September 16, 2024 and sell it today you would earn a total of  439.00  from holding Relx PLC ADR or generate 10.29% 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

Relx PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relx PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Relx PLC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Magna International

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Magna International may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

The idea behind Relx PLC ADR and Magna International 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.