Correlation Between RCS MediaGroup and DENSO CORP

Can any of the company-specific risk be diversified away by investing in both RCS MediaGroup and DENSO CORP 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 DENSO CORP 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 DENSO P ADR, you can compare the effects of market volatilities on RCS MediaGroup and DENSO CORP 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 DENSO CORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCS MediaGroup and DENSO CORP.

Diversification Opportunities for RCS MediaGroup and DENSO CORP

0.24

Correlation Coefficient

RCS MediaGroup  DENSO CORP

Modest diversification

The 3 months correlation between RCS and DENSO is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and DENSO P ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENSO P ADR 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 DENSO CORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENSO P ADR has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and DENSO CORP go up and down completely randomly.

Pair Corralation between RCS MediaGroup and DENSO CORP

Assuming the 90 days trading horizon RCS MediaGroup SpA is expected to generate 1.34 times more return on investment than DENSO CORP. However, RCS MediaGroup is 1.34 times more volatile than DENSO P ADR. It trades about 0.07 of its potential returns per unit of risk. DENSO P ADR is currently generating about 0.01 per unit of risk. If you would invest  84.00  in RCS MediaGroup SpA on October 8, 2024 and sell it today you would earn a total of  2.00  from holding RCS MediaGroup SpA or generate 2.38% 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.  DENSO P ADR

RCS MediaGroup SpA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, RCS MediaGroup may actually be approaching a critical reversion point that can send shares even higher in February 2025.

DENSO P ADR

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DENSO P ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DENSO CORP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RCS MediaGroup and DENSO CORP

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

The idea behind RCS MediaGroup SpA and DENSO P ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.