Correlation Between ITV Plc and Sinclair Broadcast
Can any of the company-specific risk be diversified away by investing in both ITV Plc and Sinclair Broadcast 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 Sinclair Broadcast into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ITV plc and Sinclair Broadcast Group, you can compare the effects of market volatilities on ITV Plc and Sinclair Broadcast 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 Sinclair Broadcast. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITV Plc and Sinclair Broadcast.
Diversification Opportunities for ITV Plc and Sinclair Broadcast
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ITV and Sinclair is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ITV plc and Sinclair Broadcast Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinclair Broadcast 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 Sinclair Broadcast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinclair Broadcast has no effect on the direction of ITV Plc i.e., ITV Plc and Sinclair Broadcast go up and down completely randomly.
Pair Corralation between ITV Plc and Sinclair Broadcast
Assuming the 90 days horizon ITV plc is expected to generate 0.44 times more return on investment than Sinclair Broadcast. However, ITV plc is 2.26 times less risky than Sinclair Broadcast. It trades about 0.22 of its potential returns per unit of risk. Sinclair Broadcast Group is currently generating about -0.12 per unit of risk. If you would invest 68.00 in ITV plc on January 27, 2024 and sell it today you would earn a total of 4.00 from holding ITV plc or generate 5.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ITV plc vs. Sinclair Broadcast Group
Performance |
| Timeline |
| ITV plc |
| Sinclair Broadcast |
ITV Plc and Sinclair Broadcast Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ITV Plc and Sinclair Broadcast
The main advantage of trading using opposite ITV Plc and Sinclair Broadcast positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV Plc position performs unexpectedly, Sinclair Broadcast 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 Sinclair Broadcast will offset losses from the drop in Sinclair Broadcast's long position.The idea behind ITV plc and Sinclair Broadcast 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.| Sinclair Broadcast vs. Walt Disney | Sinclair Broadcast vs. Roku Inc | Sinclair Broadcast vs. Netflix | Sinclair Broadcast vs. AMC Entertainment Holdings |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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