Correlation Between ITV PLC and Saga Communications
Can any of the company-specific risk be diversified away by investing in both ITV PLC and Saga Communications 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 Saga Communications 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 Saga Communications, you can compare the effects of market volatilities on ITV PLC and Saga Communications 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 Saga Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITV PLC and Saga Communications.
Diversification Opportunities for ITV PLC and Saga Communications
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between ITV and Saga is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding ITV PLC ADR and Saga Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saga Communications 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 Saga Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saga Communications has no effect on the direction of ITV PLC i.e., ITV PLC and Saga Communications go up and down completely randomly.
Pair Corralation between ITV PLC and Saga Communications
Assuming the 90 days horizon ITV PLC ADR is expected to generate 1.07 times more return on investment than Saga Communications. However, ITV PLC is 1.07 times more volatile than Saga Communications. It trades about 0.03 of its potential returns per unit of risk. Saga Communications is currently generating about -0.03 per unit of risk. If you would invest 801.00 in ITV PLC ADR on August 31, 2024 and sell it today you would earn a total of 101.00 from holding ITV PLC ADR or generate 12.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
ITV PLC ADR vs. Saga Communications
Performance |
| Timeline |
| ITV PLC ADR |
| Saga Communications |
ITV PLC and Saga Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITV PLC and Saga Communications
The main advantage of trading using opposite ITV PLC and Saga Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV PLC position performs unexpectedly, Saga Communications 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 Saga Communications will offset losses from the drop in Saga Communications' long position.The idea behind ITV PLC ADR and Saga Communications 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.| Saga Communications vs. iHeartMedia Class A | Saga Communications vs. Beasley Broadcast Group | Saga Communications vs. Cumulus Media Class | Saga Communications vs. Mediaco Holding |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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