Correlation Between RTL Group and IHeartMedia

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

Diversification Opportunities for RTL Group and IHeartMedia

-0.54

Correlation Coefficient

RTL Group  IHeartMedia

Excellent diversification

The 3 months correlation between RTL and IHeartMedia is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding RTL Group SA and iHeartMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iHeartMedia 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 IHeartMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iHeartMedia has no effect on the direction of RTL Group i.e., RTL Group and IHeartMedia go up and down completely randomly.

Pair Corralation between RTL Group and IHeartMedia

Assuming the 90 days horizon RTL Group SA is expected to generate 0.14 times more return on investment than IHeartMedia. However, RTL Group SA is 6.91 times less risky than IHeartMedia. It trades about 0.25 of its potential returns per unit of risk. iHeartMedia is currently generating about -0.21 per unit of risk. If you would invest  323.00  in RTL Group SA on November 30, 2024 and sell it today you would earn a total of  17.00  from holding RTL Group SA or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.18%
Values	Daily Returns

RTL Group SA  vs.  iHeartMedia

RTL Group SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RTL Group SA are ranked lower than 7 (%) 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.

iHeartMedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days iHeartMedia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with RTL Group and IHeartMedia

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

The idea behind RTL Group SA and iHeartMedia 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.