Correlation Between News and ITV Plc

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

Diversification Opportunities for News and ITV Plc

-0.87
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between News and ITV is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding News Corp. and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc and News 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 News Corporation 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 News i.e., News and ITV Plc go up and down completely randomly.

Pair Corralation between News and ITV Plc

Assuming the 90 days trading horizon News Corporation is expected to generate 0.43 times more return on investment than ITV Plc. However, News Corporation is 2.3 times less risky than ITV Plc. It trades about 0.32 of its potential returns per unit of risk. ITV plc is currently generating about 0.0 per unit of risk. If you would invest  2,620  in News Corporation on September 1, 2024 and sell it today you would earn a total of  320.00  from holding News Corporation or generate 12.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

News Corp.  vs.  ITV plc

 Performance 
       Timeline  
News 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in News Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, News reported solid returns over the last few months and may actually be approaching a breakup point.
ITV plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ITV plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ITV Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

News and ITV Plc Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with News and ITV Plc

The main advantage of trading using opposite News and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if News 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.
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The idea behind News Corporation and ITV 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.

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