Correlation Between RTL Group and Freedom Holdings

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

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

Diversification Opportunities for RTL Group and Freedom Holdings

0.19

Correlation Coefficient

RTL Group  Freedom Holdings

Average diversification

The 3 months correlation between RTL and Freedom is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding RTL Group SA and Freedom Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holdings and RTL Group 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 RTL Group SA are associated (or correlated) with Freedom Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holdings has no effect on the direction of RTL Group i.e., RTL Group and Freedom Holdings go up and down completely randomly.

Pair Corralation between RTL Group and Freedom Holdings

Assuming the 90 days horizon RTL Group is expected to generate 7.3 times less return on investment than Freedom Holdings. But when comparing it to its historical volatility, RTL Group SA is 18.35 times less risky than Freedom Holdings. It trades about 0.17 of its potential returns per unit of risk. Freedom Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  13.00  in Freedom Holdings on December 27, 2024 and sell it today you would lose (1.00) from holding Freedom Holdings or give up 7.69% of portfolio value over 90 days.

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

RTL Group SA  vs.  Freedom Holdings

RTL Group SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RTL Group SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, RTL Group showed solid returns over the last few months and may actually be approaching a breakup point.

Freedom Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Freedom Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RTL Group and Freedom Holdings

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

The idea behind RTL Group SA and Freedom 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.