Correlation Between WisdomTree Investments and RELX PLC

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

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

Diversification Opportunities for WisdomTree Investments and RELX PLC

0.54

Correlation Coefficient

WisdomTree Investments  RELX PLC

Very weak diversification

The 3 months correlation between WisdomTree and RELX is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding WisdomTree Investments and RELX PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELX PLC and WisdomTree Investments 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 WisdomTree Investments 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 has no effect on the direction of WisdomTree Investments i.e., WisdomTree Investments and RELX PLC go up and down completely randomly.

Pair Corralation between WisdomTree Investments and RELX PLC

Assuming the 90 days horizon WisdomTree Investments is expected to generate 1.82 times more return on investment than RELX PLC. However, WisdomTree Investments is 1.82 times more volatile than RELX PLC. It trades about 0.07 of its potential returns per unit of risk. RELX PLC is currently generating about 0.1 per unit of risk. If you would invest  505.00  in WisdomTree Investments on October 11, 2024 and sell it today you would earn a total of  471.00  from holding WisdomTree Investments or generate 93.27% return on investment over 90 days.

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

WisdomTree Investments  vs.  RELX PLC

WisdomTree Investments

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, WisdomTree Investments reported solid returns over the last few months and may actually be approaching a breakup point.

RELX PLC

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RELX PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, RELX PLC may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with WisdomTree Investments and RELX PLC

The main advantage of trading using opposite WisdomTree Investments and RELX PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WisdomTree Investments 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 WisdomTree Investments and RELX PLC 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.