Correlation Between RCS MediaGroup and National CineMedia

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

Diversification Opportunities for RCS MediaGroup and National CineMedia

0.27

Correlation Coefficient

RCS MediaGroup  National CineMedia

Modest diversification

The 3 months correlation between RCS and National is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and National CineMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National CineMedia 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 National CineMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National CineMedia has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and National CineMedia go up and down completely randomly.

Pair Corralation between RCS MediaGroup and National CineMedia

Assuming the 90 days horizon RCS MediaGroup is expected to generate 1.85 times less return on investment than National CineMedia. But when comparing it to its historical volatility, RCS MediaGroup SpA is 1.34 times less risky than National CineMedia. It trades about 0.04 of its potential returns per unit of risk. National CineMedia is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  220.00  in National CineMedia on September 20, 2024 and sell it today you would earn a total of  477.00  from holding National CineMedia or generate 216.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	67.47%
Values	Daily Returns

RCS MediaGroup SpA  vs.  National CineMedia

RCS MediaGroup SpA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, RCS MediaGroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

National CineMedia

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National CineMedia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong primary indicators, National CineMedia is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with RCS MediaGroup and National CineMedia

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

The idea behind RCS MediaGroup SpA and National CineMedia 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.