Correlation Between Catalent and RCS MediaGroup

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

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

Diversification Opportunities for Catalent and RCS MediaGroup

0.55

Correlation Coefficient

Catalent  RCS MediaGroup

Very weak diversification

The 3 months correlation between Catalent and RCS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Catalent 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 Catalent 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 Catalent 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 Catalent i.e., Catalent and RCS MediaGroup go up and down completely randomly.

Pair Corralation between Catalent and RCS MediaGroup

Given the investment horizon of 90 days Catalent is expected to generate 1.18 times less return on investment than RCS MediaGroup. But when comparing it to its historical volatility, Catalent is 2.16 times less risky than RCS MediaGroup. It trades about 0.46 of its potential returns per unit of risk. RCS MediaGroup SpA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  86.00  in RCS MediaGroup SpA on September 15, 2024 and sell it today you would earn a total of  7.00  from holding RCS MediaGroup SpA or generate 8.14% return on investment over 90 days.

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

Catalent  vs.  RCS MediaGroup SpA

Catalent

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

RCS MediaGroup SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 14 (%) 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 Catalent and RCS MediaGroup

The main advantage of trading using opposite Catalent and RCS MediaGroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catalent 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 Catalent 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.