Correlation Between ITV PLC and Aferian Plc

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

Diversification Opportunities for ITV PLC and Aferian Plc

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between ITV and Aferian is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ITV PLC ADR and Aferian Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aferian Plc 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 ADR are associated (or correlated) with Aferian Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aferian Plc has no effect on the direction of ITV PLC i.e., ITV PLC and Aferian Plc go up and down completely randomly.

Pair Corralation between ITV PLC and Aferian Plc

Assuming the 90 days horizon ITV PLC ADR is expected to generate 0.46 times more return on investment than Aferian Plc. However, ITV PLC ADR is 2.2 times less risky than Aferian Plc. It trades about -0.03 of its potential returns per unit of risk. Aferian Plc is currently generating about -0.1 per unit of risk. If you would invest  1,009  in ITV PLC ADR on November 2, 2024 and sell it today you would lose (89.00) from holding ITV PLC ADR or give up 8.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy96.26%
ValuesDaily Returns

ITV PLC ADR  vs.  Aferian Plc

 Performance 
       Timeline  
ITV PLC ADR 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days ITV PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ITV PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Aferian Plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Aferian Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ITV PLC and Aferian Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ITV PLC and Aferian Plc

The main advantage of trading using opposite ITV PLC and Aferian Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV PLC position performs unexpectedly, Aferian 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 Aferian Plc will offset losses from the drop in Aferian Plc's long position.
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The idea behind ITV PLC ADR and Aferian 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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