Correlation Between ITV Plc and News

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

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

Diversification Opportunities for ITV Plc and News

-0.72

Correlation Coefficient

ITV Plc  News

Pay attention - limited upside

The 3 months correlation between ITV and News is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ITV plc and News Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on News and ITV Plc 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 ITV plc are associated (or correlated) with News. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of News has no effect on the direction of ITV Plc i.e., ITV Plc and News go up and down completely randomly.

Pair Corralation between ITV Plc and News

Assuming the 90 days horizon ITV plc is expected to generate 2.69 times more return on investment than News. However, ITV Plc is 2.69 times more volatile than News Corporation. It trades about 0.29 of its potential returns per unit of risk. News Corporation is currently generating about -0.17 per unit of risk. If you would invest  74.00  in ITV plc on September 23, 2024 and sell it today you would earn a total of  12.00  from holding ITV plc or generate 16.22% return on investment over 90 days.

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

ITV plc  vs.  News Corp.

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 nearly stable basic indicators, ITV Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

News

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITV Plc and News

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

The idea behind ITV plc and News Corporation 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.