Correlation Between IHeartMedia and ITV PLC

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

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

Diversification Opportunities for IHeartMedia and ITV PLC

-0.03

Correlation Coefficient

IHeartMedia  ITV PLC

Good diversification

The 3 months correlation between IHeartMedia and ITV is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding iHeartMedia 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 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 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 IHeartMedia i.e., IHeartMedia and ITV PLC go up and down completely randomly.

Pair Corralation between IHeartMedia and ITV PLC

Assuming the 90 days horizon iHeartMedia is expected to under-perform the ITV PLC. In addition to that, IHeartMedia is 2.22 times more volatile than ITV PLC ADR. It trades about -0.05 of its total potential returns per unit of risk. ITV PLC ADR is currently generating about 0.0 per unit of volatility. If you would invest  902.00  in ITV PLC ADR on November 29, 2024 and sell it today you would lose (4.00) from holding ITV PLC ADR or give up 0.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

iHeartMedia  vs.  ITV PLC ADR

iHeartMedia

Risk-Adjusted Performance

Very Weak

Over the last 90 days iHeartMedia 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 somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ITV PLC ADR

Risk-Adjusted Performance

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 fairly strong basic indicators, ITV PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IHeartMedia and ITV PLC

The main advantage of trading using opposite IHeartMedia and ITV PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IHeartMedia 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 iHeartMedia 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.