Correlation Between News Corp and IHeartMedia

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

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

Diversification Opportunities for News Corp and IHeartMedia

0.4

Correlation Coefficient

News Corp  IHeartMedia

Very weak diversification

The 3 months correlation between News and IHeartMedia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding News Corp B and iHeartMedia Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iHeartMedia Class and News Corp 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 News Corp B are associated (or correlated) with IHeartMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iHeartMedia Class has no effect on the direction of News Corp i.e., News Corp and IHeartMedia go up and down completely randomly.

Pair Corralation between News Corp and IHeartMedia

Considering the 90-day investment horizon News Corp is expected to generate 3.91 times less return on investment than IHeartMedia. But when comparing it to its historical volatility, News Corp B is 4.2 times less risky than IHeartMedia. It trades about 0.01 of its potential returns per unit of risk. iHeartMedia Class A is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  188.00  in iHeartMedia Class A on December 29, 2024 and sell it today you would lose (12.00) from holding iHeartMedia Class A or give up 6.38% of portfolio value over 90 days.

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

News Corp B  vs.  iHeartMedia Class A

News Corp B

Risk-Adjusted Performance

Very Weak

Over the last 90 days News Corp B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, News Corp is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

iHeartMedia Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days iHeartMedia Class A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IHeartMedia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with News Corp and IHeartMedia

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

The idea behind News Corp B and iHeartMedia Class A 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.