Correlation Between Gray Television and RTL Group

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

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

Diversification Opportunities for Gray Television and RTL Group

0.29

Correlation Coefficient

Gray Television  RTL Group

Modest diversification

The 3 months correlation between Gray and RTL is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gray Television and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA and Gray Television 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 Gray Television 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 SA has no effect on the direction of Gray Television i.e., Gray Television and RTL Group go up and down completely randomly.

Pair Corralation between Gray Television and RTL Group

Considering the 90-day investment horizon Gray Television is expected to generate 2.09 times more return on investment than RTL Group. However, Gray Television is 2.09 times more volatile than RTL Group SA. It trades about -0.01 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.19 per unit of risk. If you would invest  478.00  in Gray Television on September 4, 2024 and sell it today you would lose (41.00) from holding Gray Television or give up 8.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Gray Television  vs.  RTL Group SA

Gray Television

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gray Television has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gray Television is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

RTL Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gray Television and RTL Group

The main advantage of trading using opposite Gray Television and RTL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gray Television 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 Gray Television and RTL Group SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.