Correlation Between S A P and RCS MediaGroup
Can any of the company-specific risk be diversified away by investing in both S A P 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 S A P and RCS MediaGroup into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SAP SE and RCS MediaGroup SpA, you can compare the effects of market volatilities on S A P 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 S A P with a short position of RCS MediaGroup. Check out your portfolio center. Please also check ongoing floating volatility patterns of S A P and RCS MediaGroup.
Diversification Opportunities for S A P and RCS MediaGroup
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SAP and RCS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding SAP SE 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 S A P 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 SAP SE 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 S A P i.e., S A P and RCS MediaGroup go up and down completely randomly.
Pair Corralation between S A P and RCS MediaGroup
Assuming the 90 days trading horizon S A P is expected to generate 1.39 times less return on investment than RCS MediaGroup. But when comparing it to its historical volatility, SAP SE is 1.23 times less risky than RCS MediaGroup. It trades about 0.15 of its potential returns per unit of risk. RCS MediaGroup SpA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 73.00 in RCS MediaGroup SpA on August 29, 2024 and sell it today you would earn a total of 13.00 from holding RCS MediaGroup SpA or generate 17.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.46% |
| Values | Daily Returns |
SAP SE vs. RCS MediaGroup SpA
Performance |
| Timeline |
| SAP SE |
| RCS MediaGroup SpA |
S A P and RCS MediaGroup Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with S A P and RCS MediaGroup
The main advantage of trading using opposite S A P and RCS MediaGroup positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if S A P 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 SAP SE 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.| RCS MediaGroup vs. Fair Isaac Corp | RCS MediaGroup vs. SYSTEMAIR AB | RCS MediaGroup vs. Air New Zealand | RCS MediaGroup vs. ECHO INVESTMENT ZY |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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