Correlation Between Freedom Holdings and ITV Plc

Can any of the company-specific risk be diversified away by investing in both Freedom Holdings and ITV Plc 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 Freedom Holdings and ITV Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Freedom Holdings and ITV plc, you can compare the effects of market volatilities on Freedom Holdings and ITV Plc 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 Freedom Holdings with a short position of ITV Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Holdings and ITV Plc.

Diversification Opportunities for Freedom Holdings and ITV Plc

-0.36

Correlation Coefficient

Freedom Holdings  ITV Plc

Very good diversification

The 3 months correlation between Freedom and ITV is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Holdings and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc and Freedom Holdings 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 Freedom Holdings are associated (or correlated) with ITV Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITV plc has no effect on the direction of Freedom Holdings i.e., Freedom Holdings and ITV Plc go up and down completely randomly.

Pair Corralation between Freedom Holdings and ITV Plc

Given the investment horizon of 90 days Freedom Holdings is expected to generate 7.83 times more return on investment than ITV Plc. However, Freedom Holdings is 7.83 times more volatile than ITV plc. It trades about 0.09 of its potential returns per unit of risk. ITV plc is currently generating about -0.1 per unit of risk. If you would invest  16.00  in Freedom Holdings on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Freedom Holdings or generate 0.0% return on investment over 90 days.

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

Freedom Holdings  vs.  ITV plc

Freedom Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Freedom Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

ITV plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITV plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Freedom Holdings and ITV Plc

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

The idea behind Freedom Holdings and ITV plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.