Correlation Between Relx PLC and Freeport

Can any of the company-specific risk be diversified away by investing in both Relx PLC and Freeport 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 Freeport 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 Freeport McMoRan 425 percent, you can compare the effects of market volatilities on Relx PLC and Freeport 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 Freeport. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and Freeport.

Diversification Opportunities for Relx PLC and Freeport

-0.05

Correlation Coefficient

Relx PLC  Freeport

Good diversification

The 3 months correlation between Relx and Freeport is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and Freeport McMoRan 425 percent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 425 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 Freeport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan 425 has no effect on the direction of Relx PLC i.e., Relx PLC and Freeport go up and down completely randomly.

Pair Corralation between Relx PLC and Freeport

Given the investment horizon of 90 days Relx PLC ADR is expected to generate 1.83 times more return on investment than Freeport. However, Relx PLC is 1.83 times more volatile than Freeport McMoRan 425 percent. It trades about 0.02 of its potential returns per unit of risk. Freeport McMoRan 425 percent is currently generating about 0.01 per unit of risk. If you would invest  4,561  in Relx PLC ADR on September 21, 2024 and sell it today you would earn a total of  72.00  from holding Relx PLC ADR or generate 1.58% 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.  Freeport McMoRan 425 percent

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Freeport McMoRan 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 425 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Relx PLC and Freeport

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

The idea behind Relx PLC ADR and Freeport McMoRan 425 percent 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.