Correlation Between RCS MediaGroup and INTERSHOP Communications

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

Diversification Opportunities for RCS MediaGroup and INTERSHOP Communications

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between RCS and INTERSHOP is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding RCS MediaGroup SpA and INTERSHOP Communications Aktie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTERSHOP Communications 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 INTERSHOP Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTERSHOP Communications has no effect on the direction of RCS MediaGroup i.e., RCS MediaGroup and INTERSHOP Communications go up and down completely randomly.

Pair Corralation between RCS MediaGroup and INTERSHOP Communications

Assuming the 90 days trading horizon RCS MediaGroup SpA is expected to generate 1.06 times more return on investment than INTERSHOP Communications. However, RCS MediaGroup is 1.06 times more volatile than INTERSHOP Communications Aktiengesellschaft. It trades about 0.24 of its potential returns per unit of risk. INTERSHOP Communications Aktiengesellschaft is currently generating about -0.16 per unit of risk. If you would invest  79.00  in RCS MediaGroup SpA on September 13, 2024 and sell it today you would earn a total of  8.00  from holding RCS MediaGroup SpA or generate 10.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

RCS MediaGroup SpA  vs.  INTERSHOP Communications Aktie

 Performance 
       Timeline  
RCS MediaGroup SpA 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
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 unsteady forward indicators, RCS MediaGroup reported solid returns over the last few months and may actually be approaching a breakup point.
INTERSHOP Communications 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in INTERSHOP Communications Aktiengesellschaft are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, INTERSHOP Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

RCS MediaGroup and INTERSHOP Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with RCS MediaGroup and INTERSHOP Communications

The main advantage of trading using opposite RCS MediaGroup and INTERSHOP Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RCS MediaGroup position performs unexpectedly, INTERSHOP Communications 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 INTERSHOP Communications will offset losses from the drop in INTERSHOP Communications' long position.
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The idea behind RCS MediaGroup SpA and INTERSHOP Communications Aktiengesellschaft 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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