Correlation Between Formula One and News Corp

Can any of the company-specific risk be diversified away by investing in both Formula One and News Corp 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 Formula One and News Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Formula One Group and News Corp B, you can compare the effects of market volatilities on Formula One and News Corp 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 Formula One with a short position of News Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formula One and News Corp.

Diversification Opportunities for Formula One and News Corp

-0.88

Correlation Coefficient

Formula One  News Corp

Pay attention - limited upside

The 3 months correlation between Formula and News is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Formula One Group and News Corp B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News Corp B and Formula One 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 Formula One Group are associated (or correlated) with News Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News Corp B has no effect on the direction of Formula One i.e., Formula One and News Corp go up and down completely randomly.

Pair Corralation between Formula One and News Corp

Assuming the 90 days horizon Formula One Group is expected to generate 0.94 times more return on investment than News Corp. However, Formula One Group is 1.06 times less risky than News Corp. It trades about 0.11 of its potential returns per unit of risk. News Corp B is currently generating about 0.07 per unit of risk. If you would invest  5,431  in Formula One Group on October 7, 2024 and sell it today you would earn a total of  1,169  from holding Formula One Group or generate 21.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	26.41%
Values	Daily Returns

Formula One Group  vs.  News Corp B

Formula One Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Formula One Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Formula One is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

News Corp B

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in News Corp B are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, News Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Formula One and News Corp

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

The idea behind Formula One Group and News Corp B 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.