Correlation Between IHeartMedia and Gray Television

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

By analyzing existing cross correlation between iHeartMedia and Gray Television, you can compare the effects of market volatilities on IHeartMedia and Gray Television 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 IHeartMedia with a short position of Gray Television. Check out your portfolio center. Please also check ongoing floating volatility patterns of IHeartMedia and Gray Television.

Diversification Opportunities for IHeartMedia and Gray Television

0.69

Correlation Coefficient

IHeartMedia  Gray Television

Poor diversification

The 3 months correlation between IHeartMedia and Gray is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iHeartMedia and Gray Television in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gray Television and IHeartMedia 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 iHeartMedia are associated (or correlated) with Gray Television. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gray Television has no effect on the direction of IHeartMedia i.e., IHeartMedia and Gray Television go up and down completely randomly.

Pair Corralation between IHeartMedia and Gray Television

Assuming the 90 days horizon iHeartMedia is expected to generate 1.53 times more return on investment than Gray Television. However, IHeartMedia is 1.53 times more volatile than Gray Television. It trades about 0.07 of its potential returns per unit of risk. Gray Television is currently generating about -0.01 per unit of risk. If you would invest  150.00  in iHeartMedia on September 4, 2024 and sell it today you would earn a total of  30.00  from holding iHeartMedia or generate 20.0% return on investment over 90 days.

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

iHeartMedia  vs.  Gray Television

iHeartMedia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iHeartMedia are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IHeartMedia sustained solid returns over the last few months and may actually be approaching a breakup point.

Gray Television

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gray Television has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Gray Television is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IHeartMedia and Gray Television

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

The idea behind iHeartMedia and Gray Television 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.