Correlation Between Relx PLC and Shell PLC

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

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

Diversification Opportunities for Relx PLC and Shell PLC

0.74

Correlation Coefficient

Relx PLC  Shell PLC

Poor diversification

The 3 months correlation between Relx and Shell is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC 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 Shell PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell PLC has no effect on the direction of Relx PLC i.e., Relx PLC and Shell PLC go up and down completely randomly.

Pair Corralation between Relx PLC and Shell PLC

Assuming the 90 days trading horizon Relx PLC is expected to generate 0.95 times more return on investment than Shell PLC. However, Relx PLC is 1.06 times less risky than Shell PLC. It trades about 0.08 of its potential returns per unit of risk. Shell PLC is currently generating about 0.0 per unit of risk. If you would invest  3,810  in Relx PLC on December 5, 2024 and sell it today you would earn a total of  810.00  from holding Relx PLC or generate 21.26% return on investment over 90 days.

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

Relx PLC  vs.  Shell PLC

Relx PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Relx PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Relx PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Shell PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Shell PLC 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 Shell PLC

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

The idea behind Relx PLC and Shell 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.