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 ADR, 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

-0.14

Correlation Coefficient

Freedom Holdings  ITV PLC

Good diversification

The 3 months correlation between Freedom and ITV is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Holdings and ITV PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV PLC ADR 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 ADR 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 4.52 times more return on investment than ITV PLC. However, Freedom Holdings is 4.52 times more volatile than ITV PLC ADR. It trades about 0.14 of its potential returns per unit of risk. ITV PLC ADR is currently generating about 0.32 per unit of risk. If you would invest  13.00  in Freedom Holdings on September 18, 2024 and sell it today you would earn a total of  3.00  from holding Freedom Holdings or generate 23.08% 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 ADR

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 ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITV PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.