Correlation Between Relx PLC and Mach Natural

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

Diversification Opportunities for Relx PLC and Mach Natural

-0.12

Correlation Coefficient

Relx PLC  Mach Natural

Good diversification

The 3 months correlation between Relx and Mach is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Mach Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mach Natural Resources 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 Mach Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mach Natural Resources has no effect on the direction of Relx PLC i.e., Relx PLC and Mach Natural go up and down completely randomly.

Pair Corralation between Relx PLC and Mach Natural

Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.62 times more return on investment than Mach Natural. However, Relx PLC ADR is 1.61 times less risky than Mach Natural. It trades about 0.08 of its potential returns per unit of risk. Mach Natural Resources is currently generating about 0.03 per unit of risk. If you would invest  3,845  in Relx PLC ADR on September 4, 2024 and sell it today you would earn a total of  903.00  from holding Relx PLC ADR or generate 23.49% 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.  Mach Natural Resources

Relx PLC ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Relx PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mach Natural Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mach Natural Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest inconsistent performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Relx PLC and Mach Natural

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

The idea behind Relx PLC ADR and Mach Natural Resources 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.