Correlation Between RTL GROUP and RTL Group

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

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

Diversification Opportunities for RTL GROUP and RTL Group

0.84

Correlation Coefficient

RTL GROUP  RTL Group

Very poor diversification

The 3 months correlation between RTL and RTL is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RTL GROUP and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 are associated (or correlated) with RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of RTL GROUP i.e., RTL GROUP and RTL Group go up and down completely randomly.

Pair Corralation between RTL GROUP and RTL Group

Assuming the 90 days trading horizon RTL GROUP is expected to under-perform the RTL Group. But the stock apears to be less risky and, when comparing its historical volatility, RTL GROUP is 1.12 times less risky than RTL Group. The stock trades about -0.1 of its potential returns per unit of risk. The RTL Group SA is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  3,020  in RTL Group SA on October 7, 2024 and sell it today you would lose (325.00) from holding RTL Group SA or give up 10.76% of portfolio value over 90 days.

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

RTL GROUP  vs.  RTL Group SA

RTL GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RTL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 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.

Pair Trading with RTL GROUP and RTL Group

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

The idea behind RTL GROUP and RTL Group SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.