Correlation Between Relx PLC and PostNL NV

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

By analyzing existing cross correlation between Relx PLC and PostNL NV, you can compare the effects of market volatilities on Relx PLC and PostNL NV 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 PostNL NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relx PLC and PostNL NV.

Diversification Opportunities for Relx PLC and PostNL NV

-0.02

Correlation Coefficient

Relx PLC  PostNL NV

Good diversification

The 3 months correlation between Relx and PostNL is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC and PostNL NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PostNL NV 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 are associated (or correlated) with PostNL NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PostNL NV has no effect on the direction of Relx PLC i.e., Relx PLC and PostNL NV go up and down completely randomly.

Pair Corralation between Relx PLC and PostNL NV

Assuming the 90 days trading horizon Relx PLC is expected to generate 0.55 times more return on investment than PostNL NV. However, Relx PLC is 1.83 times less risky than PostNL NV. It trades about 0.1 of its potential returns per unit of risk. PostNL NV is currently generating about -0.03 per unit of risk. If you would invest  4,344  in Relx PLC on December 29, 2024 and sell it today you would earn a total of  296.00  from holding Relx PLC or generate 6.81% return on investment over 90 days.

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

Relx PLC  vs.  PostNL NV

Relx PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Relx PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PostNL NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days PostNL NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, PostNL NV is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Relx PLC and PostNL NV

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

The idea behind Relx PLC and PostNL NV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.