Correlation Between ITV Plc and RTL Group
Can any of the company-specific risk be diversified away by investing in both ITV Plc and RTL Group 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 RTL Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITV plc and RTL Group SA, you can compare the effects of market volatilities on ITV Plc and RTL Group 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 RTL Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITV Plc and RTL Group.
Diversification Opportunities for ITV Plc and RTL Group
Very poor diversification
The 3 months correlation between ITV and RTL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ITV plc and RTL Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTL Group SA 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 are associated (or correlated) with RTL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTL Group SA has no effect on the direction of ITV Plc i.e., ITV Plc and RTL Group go up and down completely randomly.
Pair Corralation between ITV Plc and RTL Group
Assuming the 90 days horizon ITV plc is expected to generate 1.24 times more return on investment than RTL Group. However, ITV Plc is 1.24 times more volatile than RTL Group SA. It trades about -0.02 of its potential returns per unit of risk. RTL Group SA is currently generating about -0.25 per unit of risk. If you would invest 88.00 in ITV plc on August 31, 2024 and sell it today you would lose (3.00) from holding ITV plc or give up 3.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITV plc vs. RTL Group SA
Performance |
| Timeline |
| ITV plc |
| RTL Group SA |
ITV Plc and RTL Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITV Plc and RTL Group
The main advantage of trading using opposite ITV Plc and RTL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV Plc position performs unexpectedly, RTL Group 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 RTL Group will offset losses from the drop in RTL Group's long position.| ITV Plc vs. News Corporation | ITV Plc vs. News Corporation | ITV Plc vs. RTL Group SA | ITV Plc vs. Nexstar Media Group |
| RTL Group vs. Magnachip Semiconductor | RTL Group vs. Dairy Farm International | RTL Group vs. MagnaChip Semiconductor Corp | RTL Group vs. AUSNUTRIA DAIRY |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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