Correlation Between RCS MediaGroup and BW Offshore

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

By analyzing existing cross correlation between RCS MediaGroup SpA and BW Offshore Limited, you can compare the effects of market volatilities on RCS MediaGroup and BW Offshore 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 RCS MediaGroup with a short position of BW Offshore. Check out your portfolio center. Please also check ongoing floating volatility patterns of RCS MediaGroup and BW Offshore.

Diversification Opportunities for RCS MediaGroup and BW Offshore

-0.05

Correlation Coefficient

RCS MediaGroup  BW Offshore

Good diversification

The 3 months correlation between RCS and BWOFY is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and BW Offshore Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Offshore Limited and RCS MediaGroup 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 RCS MediaGroup SpA are associated (or correlated) with BW Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Offshore Limited has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and BW Offshore go up and down completely randomly.

Pair Corralation between RCS MediaGroup and BW Offshore

Assuming the 90 days horizon RCS MediaGroup SpA is expected to generate 1.52 times more return on investment than BW Offshore. However, RCS MediaGroup is 1.52 times more volatile than BW Offshore Limited. It trades about 0.18 of its potential returns per unit of risk. BW Offshore Limited is currently generating about -0.04 per unit of risk. If you would invest  89.00  in RCS MediaGroup SpA on December 25, 2024 and sell it today you would earn a total of  24.00  from holding RCS MediaGroup SpA or generate 26.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

RCS MediaGroup SpA  vs.  BW Offshore Limited

RCS MediaGroup SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, RCS MediaGroup reported solid returns over the last few months and may actually be approaching a breakup point.

BW Offshore Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days BW Offshore Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BW Offshore is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with RCS MediaGroup and BW Offshore

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

The idea behind RCS MediaGroup SpA and BW Offshore Limited 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.