Correlation Between ITV Plc and Nexstar Broadcasting

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

Diversification Opportunities for ITV Plc and Nexstar Broadcasting

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between ITV and Nexstar is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding ITV Plc and Nexstar Broadcasting Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nexstar Broadcasting 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 Nexstar Broadcasting. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nexstar Broadcasting has no effect on the direction of ITV Plc i.e., ITV Plc and Nexstar Broadcasting go up and down completely randomly.

Pair Corralation between ITV Plc and Nexstar Broadcasting

Assuming the 90 days horizon ITV Plc is expected to under-perform the Nexstar Broadcasting. But the pink sheet apears to be less risky and, when comparing its historical volatility, ITV Plc is 1.78 times less risky than Nexstar Broadcasting. The pink sheet trades about -0.14 of its potential returns per unit of risk. The Nexstar Broadcasting Group is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  17,805  in Nexstar Broadcasting Group on December 29, 2023 and sell it today you would lose (616.00) from holding Nexstar Broadcasting Group or give up 3.46% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

ITV Plc  vs.  Nexstar Broadcasting Group

 Performance 
       Timeline  
ITV Plc 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days ITV Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Nexstar Broadcasting 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Nexstar Broadcasting Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Nexstar Broadcasting may actually be approaching a critical reversion point that can send shares even higher in April 2024.

ITV Plc and Nexstar Broadcasting Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ITV Plc and Nexstar Broadcasting

The main advantage of trading using opposite ITV Plc and Nexstar Broadcasting positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV Plc position performs unexpectedly, Nexstar Broadcasting 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 Nexstar Broadcasting will offset losses from the drop in Nexstar Broadcasting's long position.
The idea behind ITV Plc and Nexstar Broadcasting Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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