Correlation Between ITV PLC and Fonu2

Can any of the company-specific risk be diversified away by investing in both ITV PLC and Fonu2 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 Fonu2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ITV PLC ADR and Fonu2 Inc, you can compare the effects of market volatilities on ITV PLC and Fonu2 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 Fonu2. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITV PLC and Fonu2.

Diversification Opportunities for ITV PLC and Fonu2

-0.56

Correlation Coefficient

ITV PLC  Fonu2

Excellent diversification

The 3 months correlation between ITV and Fonu2 is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ITV PLC ADR and Fonu2 Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fonu2 Inc 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 ADR are associated (or correlated) with Fonu2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fonu2 Inc has no effect on the direction of ITV PLC i.e., ITV PLC and Fonu2 go up and down completely randomly.

Pair Corralation between ITV PLC and Fonu2

Assuming the 90 days horizon ITV PLC ADR is expected to under-perform the Fonu2. But the pink sheet apears to be less risky and, when comparing its historical volatility, ITV PLC ADR is 70.78 times less risky than Fonu2. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Fonu2 Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Fonu2 Inc on August 31, 2024 and sell it today you would earn a total of  0.00  from holding Fonu2 Inc or generate 0.0% return on investment over 90 days.

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

ITV PLC ADR  vs.  Fonu2 Inc

ITV PLC ADR

Risk-Adjusted Performance

0 of 100

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Fonu2 Inc

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fonu2 Inc are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fonu2 unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ITV PLC and Fonu2

The main advantage of trading using opposite ITV PLC and Fonu2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV PLC position performs unexpectedly, Fonu2 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 Fonu2 will offset losses from the drop in Fonu2's long position.

The idea behind ITV PLC ADR and Fonu2 Inc 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 Stocks Directory module to find actively traded stocks across global markets.