Correlation Between Relx PLC and Gannett
Can any of the company-specific risk be diversified away by investing in both Relx PLC and Gannett 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 Gannett 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 Gannett Co, you can compare the effects of market volatilities on Relx PLC and Gannett 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 Gannett. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Gannett.
Diversification Opportunities for Relx PLC and Gannett
Very good diversification
The 3 months correlation between Relx and Gannett is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Gannett Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gannett 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 Gannett. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gannett has no effect on the direction of Relx PLC i.e., Relx PLC and Gannett go up and down completely randomly.
Pair Corralation between Relx PLC and Gannett
Given the investment horizon of 90 days Relx PLC is expected to generate 5.63 times less return on investment than Gannett. But when comparing it to its historical volatility, Relx PLC ADR is 6.51 times less risky than Gannett. It trades about 0.26 of its potential returns per unit of risk. Gannett Co is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 240.00 in Gannett Co on February 10, 2024 and sell it today you would earn a total of 81.00 from holding Gannett Co or generate 33.75% 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. Gannett Co
Performance |
Timeline |
Relx PLC ADR |
Gannett |
Relx PLC and Gannett Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Relx PLC and Gannett
The main advantage of trading using opposite Relx PLC and Gannett positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relx PLC position performs unexpectedly, Gannett 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 Gannett will offset losses from the drop in Gannett's long position.Relx PLC vs. Maximus | Relx PLC vs. CBIZ Inc | Relx PLC vs. First Advantage Corp | Relx PLC vs. Network 1 Technologies |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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