Correlation Between Reservoir Media and RCS MediaGroup

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

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

Diversification Opportunities for Reservoir Media and RCS MediaGroup

0.77

Correlation Coefficient

Reservoir Media  RCS MediaGroup

Poor diversification

The 3 months correlation between Reservoir and RCS is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and RCS MediaGroup SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCS MediaGroup SpA and Reservoir Media 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 Reservoir Media are associated (or correlated) with RCS MediaGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCS MediaGroup SpA has no effect on the direction of Reservoir Media i.e., Reservoir Media and RCS MediaGroup go up and down completely randomly.

Pair Corralation between Reservoir Media and RCS MediaGroup

Given the investment horizon of 90 days Reservoir Media is expected to generate 2.39 times less return on investment than RCS MediaGroup. But when comparing it to its historical volatility, Reservoir Media is 2.62 times less risky than RCS MediaGroup. It trades about 0.06 of its potential returns per unit of risk. RCS MediaGroup SpA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  57.00  in RCS MediaGroup SpA on September 13, 2024 and sell it today you would earn a total of  34.00  from holding RCS MediaGroup SpA or generate 59.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	67.41%
Values	Daily Returns

Reservoir Media  vs.  RCS MediaGroup SpA

Reservoir Media

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

RCS MediaGroup SpA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, RCS MediaGroup reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reservoir Media and RCS MediaGroup

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

The idea behind Reservoir Media and RCS MediaGroup SpA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.