Correlation Between RTL Group and Gray Television

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

Diversification Opportunities for RTL Group and Gray Television

0.69

Correlation Coefficient

RTL Group  Gray Television

Poor diversification

The 3 months correlation between RTL and Gray is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding RTL Group SA and Gray Television in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gray Television 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 Gray Television. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gray Television has no effect on the direction of RTL Group i.e., RTL Group and Gray Television go up and down completely randomly.

Pair Corralation between RTL Group and Gray Television

Assuming the 90 days horizon RTL Group is expected to generate 2.58 times less return on investment than Gray Television. But when comparing it to its historical volatility, RTL Group SA is 2.98 times less risky than Gray Television. It trades about 0.24 of its potential returns per unit of risk. Gray Television is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  306.00  in Gray Television on December 26, 2024 and sell it today you would earn a total of  175.00  from holding Gray Television or generate 57.19% return on investment over 90 days.

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

RTL Group SA  vs.  Gray Television

RTL Group SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in RTL Group SA are ranked lower than 18 (%) 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.

Gray Television

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gray Television are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Gray Television displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RTL Group and Gray Television

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

The idea behind RTL Group SA and Gray Television 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.