Correlation Between CN MODERN and RTL GROUP

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

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

Diversification Opportunities for CN MODERN and RTL GROUP

0.84

Correlation Coefficient

CN MODERN  RTL GROUP

Very poor diversification

The 3 months correlation between 07M and RTL is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and RTL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL GROUP and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with RTL GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL GROUP has no effect on the direction of CN MODERN i.e., CN MODERN and RTL GROUP go up and down completely randomly.

Pair Corralation between CN MODERN and RTL GROUP

Assuming the 90 days trading horizon CN MODERN is expected to generate 1.27 times less return on investment than RTL GROUP. In addition to that, CN MODERN is 3.16 times more volatile than RTL GROUP. It trades about 0.08 of its total potential returns per unit of risk. RTL GROUP is currently generating about 0.33 per unit of volatility. If you would invest  2,685  in RTL GROUP on December 19, 2024 and sell it today you would earn a total of  900.00  from holding RTL GROUP or generate 33.52% return on investment over 90 days.

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

CN MODERN DAIRY  vs.  RTL GROUP

CN MODERN DAIRY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CN MODERN DAIRY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, CN MODERN exhibited solid returns over the last few months and may actually be approaching a breakup point.

RTL GROUP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RTL GROUP are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, RTL GROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CN MODERN and RTL GROUP

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

The idea behind CN MODERN DAIRY and RTL GROUP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.