Correlation Between Relx PLC and Manulife Financial

Can any of the company-specific risk be diversified away by investing in both Relx PLC and Manulife 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 Manulife 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 Manulife Financial, you can compare the effects of market volatilities on Relx PLC and Manulife 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 Manulife Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Manulife Financial.

Diversification Opportunities for Relx PLC and Manulife Financial

-0.05

Correlation Coefficient

Relx PLC  Manulife Financial

Good diversification

The 3 months correlation between Relx and Manulife is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Manulife Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Manulife 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 Manulife Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Manulife Financial has no effect on the direction of Relx PLC i.e., Relx PLC and Manulife Financial go up and down completely randomly.

Pair Corralation between Relx PLC and Manulife Financial

Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.46 times more return on investment than Manulife Financial. However, Relx PLC ADR is 2.18 times less risky than Manulife Financial. It trades about 0.0 of its potential returns per unit of risk. Manulife Financial is currently generating about -0.1 per unit of risk. If you would invest  4,578  in Relx PLC ADR on September 23, 2024 and sell it today you would lose (31.00) from holding Relx PLC ADR or give up 0.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.22%
Values	Daily Returns

Relx PLC ADR  vs.  Manulife Financial

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 latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Manulife Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Manulife Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Manulife Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Relx PLC and Manulife Financial

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

The idea behind Relx PLC ADR and Manulife Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.