Correlation Between Insurance Australia and RCS MediaGroup

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

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

Diversification Opportunities for Insurance Australia and RCS MediaGroup

-0.79

Correlation Coefficient

Insurance Australia  RCS MediaGroup

Pay attention - limited upside

The 3 months correlation between Insurance and RCS is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group 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 Insurance Australia 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 Insurance Australia Group 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 Insurance Australia i.e., Insurance Australia and RCS MediaGroup go up and down completely randomly.

Pair Corralation between Insurance Australia and RCS MediaGroup

Assuming the 90 days horizon Insurance Australia Group is expected to under-perform the RCS MediaGroup. In addition to that, Insurance Australia is 1.04 times more volatile than RCS MediaGroup SpA. It trades about -0.08 of its total potential returns per unit of risk. RCS MediaGroup SpA is currently generating about 0.16 per unit of volatility. If you would invest  85.00  in RCS MediaGroup SpA on December 22, 2024 and sell it today you would earn a total of  18.00  from holding RCS MediaGroup SpA or generate 21.18% return on investment over 90 days.

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

Insurance Australia Group  vs.  RCS MediaGroup SpA

Insurance Australia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Insurance Australia Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 12 (%) 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.

Pair Trading with Insurance Australia and RCS MediaGroup

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

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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.