Correlation Between Tegna and IHeartMedia

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

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

Diversification Opportunities for Tegna and IHeartMedia

0.86

Correlation Coefficient

Tegna  IHeartMedia

Very poor diversification

The 3 months correlation between Tegna and IHeartMedia is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tegna Inc and iHeartMedia Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iHeartMedia Class and Tegna 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 Tegna Inc 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 Tegna i.e., Tegna and IHeartMedia go up and down completely randomly.

Pair Corralation between Tegna and IHeartMedia

Given the investment horizon of 90 days Tegna is expected to generate 1.99 times less return on investment than IHeartMedia. But when comparing it to its historical volatility, Tegna Inc is 2.9 times less risky than IHeartMedia. It trades about 0.22 of its potential returns per unit of risk. iHeartMedia Class A is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  150.00  in iHeartMedia Class A on September 3, 2024 and sell it today you would earn a total of  97.00  from holding iHeartMedia Class A or generate 64.67% return on investment over 90 days.

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

Tegna Inc  vs.  iHeartMedia Class A

Tegna Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tegna Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tegna sustained solid returns over the last few months and may actually be approaching a breakup point.

iHeartMedia Class

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iHeartMedia Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, IHeartMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tegna and IHeartMedia

The main advantage of trading using opposite Tegna and IHeartMedia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tegna 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 Tegna Inc 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.