Correlation Between Aeorema Communications and ITV PLC
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications 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 Aeorema Communications and ITV PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeorema Communications Plc and ITV PLC, you can compare the effects of market volatilities on Aeorema Communications 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 Aeorema Communications with a short position of ITV PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and ITV PLC.
Diversification Opportunities for Aeorema Communications and ITV PLC
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aeorema and ITV is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications Plc and ITV PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV PLC and Aeorema Communications 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 Aeorema Communications Plc 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 Aeorema Communications i.e., Aeorema Communications and ITV PLC go up and down completely randomly.
Pair Corralation between Aeorema Communications and ITV PLC
Assuming the 90 days trading horizon Aeorema Communications Plc is expected to generate 0.38 times more return on investment than ITV PLC. However, Aeorema Communications Plc is 2.64 times less risky than ITV PLC. It trades about 0.13 of its potential returns per unit of risk. ITV PLC is currently generating about -0.02 per unit of risk. If you would invest 5,250 in Aeorema Communications Plc on September 4, 2024 and sell it today you would earn a total of 200.00 from holding Aeorema Communications Plc or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Aeorema Communications Plc vs. ITV PLC
Performance |
| Timeline |
| Aeorema Communications |
| ITV PLC |
Aeorema Communications and ITV PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and ITV PLC
The main advantage of trading using opposite Aeorema Communications and ITV PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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.| Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Hyundai Motor | Aeorema Communications vs. Toyota Motor Corp |
| ITV PLC vs. Herald Investment Trust | ITV PLC vs. Bloomsbury Publishing Plc | ITV PLC vs. Wyndham Hotels Resorts | ITV PLC vs. Monks Investment Trust |
Check out your portfolio center.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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