Correlation Between RTL Group and Shenandoah Telecommunicatio

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

Diversification Opportunities for RTL Group and Shenandoah Telecommunicatio

0.32

Correlation Coefficient

RTL Group  Shenandoah Telecommunicatio

Weak diversification

The 3 months correlation between RTL and Shenandoah is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding RTL Group SA and Shenandoah Telecommunications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenandoah Telecommunicatio 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 Shenandoah Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenandoah Telecommunicatio has no effect on the direction of RTL Group i.e., RTL Group and Shenandoah Telecommunicatio go up and down completely randomly.

Pair Corralation between RTL Group and Shenandoah Telecommunicatio

Assuming the 90 days trading horizon RTL Group SA is expected to generate 0.56 times more return on investment than Shenandoah Telecommunicatio. However, RTL Group SA is 1.78 times less risky than Shenandoah Telecommunicatio. It trades about -0.05 of its potential returns per unit of risk. Shenandoah Telecommunications is currently generating about -0.06 per unit of risk. If you would invest  3,015  in RTL Group SA on October 25, 2024 and sell it today you would lose (240.00) from holding RTL Group SA or give up 7.96% of portfolio value over 90 days.

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

RTL Group SA  vs.  Shenandoah Telecommunications

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. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Shenandoah Telecommunicatio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with RTL Group and Shenandoah Telecommunicatio

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

The idea behind RTL Group SA and Shenandoah Telecommunications 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.

Check out your portfolio center.

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 Valuation module to check real value of public entities based on technical and fundamental data.