Correlation Between Inception Growth and ITV Plc

Can any of the company-specific risk be diversified away by investing in both Inception Growth 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 Inception Growth and ITV Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inception Growth Acquisition and ITV plc, you can compare the effects of market volatilities on Inception Growth 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 Inception Growth with a short position of ITV Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inception Growth and ITV Plc.

Diversification Opportunities for Inception Growth and ITV Plc

-0.45

Correlation Coefficient

Inception Growth  ITV Plc

Very good diversification

The 3 months correlation between Inception and ITV is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Inception Growth Acquisition and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc and Inception Growth 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 Inception Growth Acquisition 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 Inception Growth i.e., Inception Growth and ITV Plc go up and down completely randomly.

Pair Corralation between Inception Growth and ITV Plc

Given the investment horizon of 90 days Inception Growth is expected to generate 3.96 times less return on investment than ITV Plc. But when comparing it to its historical volatility, Inception Growth Acquisition is 2.78 times less risky than ITV Plc. It trades about 0.15 of its potential returns per unit of risk. ITV plc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  68.00  in ITV plc on January 28, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Inception Growth Acquisition  vs.  ITV plc

Inception Growth Acq

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inception Growth Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Inception Growth is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

ITV plc

Risk-Adjusted Performance

0 of 100

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.

Pair Trading with Inception Growth and ITV Plc

The main advantage of trading using opposite Inception Growth and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inception Growth 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.

The idea behind Inception Growth Acquisition 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.