Correlation Between Relx PLC and Innodata

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

Diversification Opportunities for Relx PLC and Innodata

0.21

Correlation Coefficient

Relx PLC  Innodata

Modest diversification

The 3 months correlation between Relx and Innodata is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Innodata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innodata 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 Innodata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innodata has no effect on the direction of Relx PLC i.e., Relx PLC and Innodata go up and down completely randomly.

Pair Corralation between Relx PLC and Innodata

Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.17 times more return on investment than Innodata. However, Relx PLC ADR is 6.05 times less risky than Innodata. It trades about 0.14 of its potential returns per unit of risk. Innodata is currently generating about 0.01 per unit of risk. If you would invest  4,540  in Relx PLC ADR on December 29, 2024 and sell it today you would earn a total of  476.00  from holding Relx PLC ADR or generate 10.48% return on investment over 90 days.

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

Relx PLC ADR  vs.  Innodata

Relx PLC ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Relx PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Innodata

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Relx PLC and Innodata

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

The idea behind Relx PLC ADR and Innodata 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.