Correlation Between RCS MediaGroup and Catalent

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

Diversification Opportunities for RCS MediaGroup and Catalent

0.55

Correlation Coefficient

RCS MediaGroup  Catalent

Very weak diversification

The 3 months correlation between RCS and Catalent is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and Catalent go up and down completely randomly.

Pair Corralation between RCS MediaGroup and Catalent

Assuming the 90 days horizon RCS MediaGroup SpA is expected to generate 2.16 times more return on investment than Catalent. However, RCS MediaGroup is 2.16 times more volatile than Catalent. It trades about 0.25 of its potential returns per unit of risk. Catalent is currently generating about 0.46 per unit of risk. If you would invest  86.00  in RCS MediaGroup SpA on September 15, 2024 and sell it today you would earn a total of  7.00  from holding RCS MediaGroup SpA or generate 8.14% return on investment over 90 days.

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

RCS MediaGroup SpA  vs.  Catalent

RCS MediaGroup SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 14 (%) 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.

Catalent

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RCS MediaGroup and Catalent

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

The idea behind RCS MediaGroup SpA and Catalent 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.