Correlation Between ITV Plc and Freedom Holdings
Can any of the company-specific risk be diversified away by investing in both ITV Plc and Freedom Holdings 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 Freedom Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITV plc and Freedom Holdings, you can compare the effects of market volatilities on ITV Plc and Freedom Holdings 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 Freedom Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITV Plc and Freedom Holdings.
Diversification Opportunities for ITV Plc and Freedom Holdings
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between ITV and Freedom is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ITV plc and Freedom Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Holdings 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 Freedom Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Holdings has no effect on the direction of ITV Plc i.e., ITV Plc and Freedom Holdings go up and down completely randomly.
Pair Corralation between ITV Plc and Freedom Holdings
Assuming the 90 days horizon ITV plc is expected to under-perform the Freedom Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, ITV plc is 5.62 times less risky than Freedom Holdings. The pink sheet trades about -0.22 of its potential returns per unit of risk. The Freedom Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 15.00 in Freedom Holdings on September 3, 2024 and sell it today you would earn a total of 0.00 from holding Freedom Holdings or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITV plc vs. Freedom Holdings
Performance |
| Timeline |
| ITV plc |
| Freedom Holdings |
ITV Plc and Freedom Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITV Plc and Freedom Holdings
The main advantage of trading using opposite ITV Plc and Freedom Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV Plc position performs unexpectedly, Freedom Holdings 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 Freedom Holdings will offset losses from the drop in Freedom Holdings' long position.The idea behind ITV plc and Freedom Holdings 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.| Freedom Holdings vs. RTL Group SA | Freedom Holdings vs. ITV plc | Freedom Holdings vs. ITV PLC ADR | Freedom Holdings vs. iHeartMedia |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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