Correlation Between RCS MediaGroup and Visa

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

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

Diversification Opportunities for RCS MediaGroup and Visa

0.21

Correlation Coefficient

RCS MediaGroup  Visa

Modest diversification

The 3 months correlation between RCS and Visa is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and RCS MediaGroup 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 RCS MediaGroup SpA are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and Visa go up and down completely randomly.

Pair Corralation between RCS MediaGroup and Visa

Assuming the 90 days trading horizon RCS MediaGroup SpA is expected to generate 1.71 times more return on investment than Visa. However, RCS MediaGroup is 1.71 times more volatile than Visa Inc. It trades about 0.13 of its potential returns per unit of risk. Visa Inc is currently generating about 0.07 per unit of risk. If you would invest  85.00  in RCS MediaGroup SpA on December 29, 2024 and sell it today you would earn a total of  16.00  from holding RCS MediaGroup SpA or generate 18.82% return on investment over 90 days.

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

RCS MediaGroup SpA  vs.  Visa Inc

RCS MediaGroup SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, RCS MediaGroup reported solid returns over the last few months and may actually be approaching a breakup point.

Visa Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Visa is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with RCS MediaGroup and Visa

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

The idea behind RCS MediaGroup SpA and Visa 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.