Correlation Between ITV Plc and Safran SA

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

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

Diversification Opportunities for ITV Plc and Safran SA

0.48

Correlation Coefficient

ITV Plc  Safran SA

Very weak diversification

The 3 months correlation between ITV and Safran is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ITV plc and Safran SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safran SA 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 Safran SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safran SA has no effect on the direction of ITV Plc i.e., ITV Plc and Safran SA go up and down completely randomly.

Pair Corralation between ITV Plc and Safran SA

Assuming the 90 days horizon ITV Plc is expected to generate 1.48 times less return on investment than Safran SA. In addition to that, ITV Plc is 1.19 times more volatile than Safran SA. It trades about 0.09 of its total potential returns per unit of risk. Safran SA is currently generating about 0.16 per unit of volatility. If you would invest  21,000  in Safran SA on December 28, 2024 and sell it today you would earn a total of  3,930  from holding Safran SA or generate 18.71% return on investment over 90 days.

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

ITV plc  vs.  Safran SA

ITV plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ITV plc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ITV Plc may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Safran SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Safran SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking indicators, Safran SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITV Plc and Safran SA

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

The idea behind ITV plc and Safran SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.