Correlation Between RTL Group and News

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

Diversification Opportunities for RTL Group and News

-0.9

Correlation Coefficient

RTL Group  News

Pay attention - limited upside

The 3 months correlation between RTL and News is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding RTL Group SA and News Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News 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 News. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News has no effect on the direction of RTL Group i.e., RTL Group and News go up and down completely randomly.

Pair Corralation between RTL Group and News

Assuming the 90 days trading horizon RTL Group SA is expected to under-perform the News. In addition to that, RTL Group is 1.42 times more volatile than News Corporation. It trades about -0.11 of its total potential returns per unit of risk. News Corporation is currently generating about 0.2 per unit of volatility. If you would invest  2,530  in News Corporation on September 5, 2024 and sell it today you would earn a total of  490.00  from holding News Corporation or generate 19.37% return on investment over 90 days.

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

RTL Group SA  vs.  News Corp.

RTL Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

News

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RTL Group and News

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

The idea behind RTL Group SA and News Corporation 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.