Correlation Between RTL Group and ITV Plc
Can any of the company-specific risk be diversified away by investing in both RTL Group 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 RTL Group and ITV Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RTL Group SA and ITV plc, you can compare the effects of market volatilities on RTL Group 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 RTL Group with a short position of ITV Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of RTL Group and ITV Plc.
Diversification Opportunities for RTL Group and ITV Plc
Very poor diversification
The 3 months correlation between RTL and ITV is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding RTL Group SA and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc and RTL Group 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 RTL Group SA 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 RTL Group i.e., RTL Group and ITV Plc go up and down completely randomly.
Pair Corralation between RTL Group and ITV Plc
Assuming the 90 days trading horizon RTL Group SA is expected to under-perform the ITV Plc. But the stock apears to be less risky and, when comparing its historical volatility, RTL Group SA is 1.3 times less risky than ITV Plc. The stock trades about -0.35 of its potential returns per unit of risk. The ITV plc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 90.00 in ITV plc on August 29, 2024 and sell it today you would lose (5.00) from holding ITV plc or give up 5.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
RTL Group SA vs. ITV plc
Performance |
| Timeline |
| RTL Group SA |
| ITV plc |
RTL Group and ITV Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RTL Group and ITV Plc
The main advantage of trading using opposite RTL Group and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RTL Group 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.| RTL Group vs. SLR Investment Corp | RTL Group vs. SEI INVESTMENTS | RTL Group vs. Calibre Mining Corp | RTL Group vs. Chunghwa Telecom Co |
| ITV Plc vs. NorAm Drilling AS | ITV Plc vs. Superior Plus Corp | ITV Plc vs. NMI Holdings | ITV Plc vs. Origin Agritech |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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