Correlation Between Relx PLC and SNDL

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

Diversification Opportunities for Relx PLC and SNDL

0.25

Correlation Coefficient

Relx PLC  SNDL

Modest diversification

The 3 months correlation between Relx and SNDL is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Relx PLC ADR and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc 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 SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Relx PLC i.e., Relx PLC and SNDL go up and down completely randomly.

Pair Corralation between Relx PLC and SNDL

Given the investment horizon of 90 days Relx PLC ADR is expected to generate 0.26 times more return on investment than SNDL. However, Relx PLC ADR is 3.88 times less risky than SNDL. It trades about 0.11 of its potential returns per unit of risk. SNDL Inc is currently generating about 0.01 per unit of risk. If you would invest  2,673  in Relx PLC ADR on September 15, 2024 and sell it today you would earn a total of  2,033  from holding Relx PLC ADR or generate 76.06% 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.  SNDL Inc

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.

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Relx PLC and SNDL

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

The idea behind Relx PLC ADR and SNDL Inc 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.