Correlation Between RCS MediaGroup and Power Assets

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

Diversification Opportunities for RCS MediaGroup and Power Assets

-0.29

Correlation Coefficient

RCS MediaGroup  Power Assets

Very good diversification

The 3 months correlation between RCS and Power is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and Power Assets go up and down completely randomly.

Pair Corralation between RCS MediaGroup and Power Assets

Assuming the 90 days trading horizon RCS MediaGroup SpA is expected to generate 1.8 times more return on investment than Power Assets. However, RCS MediaGroup is 1.8 times more volatile than Power Assets Holdings. It trades about 0.14 of its potential returns per unit of risk. Power Assets Holdings is currently generating about -0.04 per unit of risk. If you would invest  86.00  in RCS MediaGroup SpA on December 19, 2024 and sell it today you would earn a total of  16.00  from holding RCS MediaGroup SpA or generate 18.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

RCS MediaGroup SpA  vs.  Power Assets Holdings

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.

Power Assets Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Power Assets Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Power Assets is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with RCS MediaGroup and Power Assets

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

The idea behind RCS MediaGroup SpA and Power Assets Holdings 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.