Correlation Between Relx PLC and Wabash National

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

Diversification Opportunities for Relx PLC and Wabash National

0.15

Correlation Coefficient

Relx PLC  Wabash National

Average diversification

The 3 months correlation between Relx and Wabash is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of Relx PLC i.e., Relx PLC and Wabash National go up and down completely randomly.

Pair Corralation between Relx PLC and Wabash National

Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.48 times more return on investment than Wabash National. However, Relx PLC ADR is 2.07 times less risky than Wabash National. It trades about -0.03 of its potential returns per unit of risk. Wabash National is currently generating about -0.02 per unit of risk. If you would invest  4,812  in Relx PLC ADR on September 16, 2024 and sell it today you would lose (106.00) from holding Relx PLC ADR or give up 2.2% of portfolio value over 90 days.

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

Relx PLC ADR  vs.  Wabash National

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.

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Wabash National is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Relx PLC and Wabash National

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

The idea behind Relx PLC ADR and Wabash National 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.