Correlation Between METALL ZUG and ITV PLC

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Can any of the company-specific risk be diversified away by investing in both METALL ZUG and ITV PLC 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 METALL ZUG and ITV PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METALL ZUG AG and ITV PLC, you can compare the effects of market volatilities on METALL ZUG and ITV PLC 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 METALL ZUG with a short position of ITV PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of METALL ZUG and ITV PLC.

Diversification Opportunities for METALL ZUG and ITV PLC

0.4
  Correlation Coefficient

Very weak diversification

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

Pair Corralation between METALL ZUG and ITV PLC

Assuming the 90 days trading horizon METALL ZUG AG is expected to under-perform the ITV PLC. But the stock apears to be less risky and, when comparing its historical volatility, METALL ZUG AG is 1.9 times less risky than ITV PLC. The stock trades about -0.07 of its potential returns per unit of risk. The ITV PLC is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  6,185  in ITV PLC on September 14, 2024 and sell it today you would earn a total of  1,255  from holding ITV PLC or generate 20.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

METALL ZUG AG  vs.  ITV PLC

 Performance 
       Timeline  
METALL ZUG AG 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days METALL ZUG AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, METALL ZUG is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
ITV PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ITV PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ITV PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

METALL ZUG and ITV PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with METALL ZUG and ITV PLC

The main advantage of trading using opposite METALL ZUG and ITV PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METALL ZUG position performs unexpectedly, ITV PLC 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 ITV PLC will offset losses from the drop in ITV PLC's long position.
The idea behind METALL ZUG AG and ITV PLC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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