Correlation Between WOLTERS KLUWER and RCS MediaGroup

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

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

Diversification Opportunities for WOLTERS KLUWER and RCS MediaGroup

0.43

Correlation Coefficient

WOLTERS KLUWER  RCS MediaGroup

Very weak diversification

The 3 months correlation between WOLTERS and RCS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding WOLTERS KLUWER ADR and RCS MediaGroup SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCS MediaGroup SpA and WOLTERS KLUWER 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 WOLTERS KLUWER ADR are associated (or correlated) with RCS MediaGroup. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCS MediaGroup SpA has no effect on the direction of WOLTERS KLUWER i.e., WOLTERS KLUWER and RCS MediaGroup go up and down completely randomly.

Pair Corralation between WOLTERS KLUWER and RCS MediaGroup

Assuming the 90 days horizon WOLTERS KLUWER ADR is expected to generate 0.93 times more return on investment than RCS MediaGroup. However, WOLTERS KLUWER ADR is 1.07 times less risky than RCS MediaGroup. It trades about 0.06 of its potential returns per unit of risk. RCS MediaGroup SpA is currently generating about 0.05 per unit of risk. If you would invest  11,007  in WOLTERS KLUWER ADR on October 23, 2024 and sell it today you would earn a total of  5,993  from holding WOLTERS KLUWER ADR or generate 54.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.79%
Values	Daily Returns

WOLTERS KLUWER ADR  vs.  RCS MediaGroup SpA

WOLTERS KLUWER ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WOLTERS KLUWER ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WOLTERS KLUWER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

RCS MediaGroup SpA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RCS MediaGroup SpA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, RCS MediaGroup reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WOLTERS KLUWER and RCS MediaGroup

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

The idea behind WOLTERS KLUWER ADR and RCS MediaGroup SpA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.