Correlation Between ITV Plc and Tegna

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

By analyzing existing cross correlation between ITV plc and Tegna Inc, you can compare the effects of market volatilities on ITV Plc and Tegna 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 Tegna. Check out your portfolio center. Please also check ongoing floating volatility patterns of ITV Plc and Tegna.

Diversification Opportunities for ITV Plc and Tegna

0.21

Correlation Coefficient

ITV Plc  Tegna

Modest diversification

The 3 months correlation between ITV and Tegna is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding ITV plc and Tegna Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tegna Inc 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 Tegna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tegna Inc has no effect on the direction of ITV Plc i.e., ITV Plc and Tegna go up and down completely randomly.

Pair Corralation between ITV Plc and Tegna

Assuming the 90 days horizon ITV plc is expected to under-perform the Tegna. But the pink sheet apears to be less risky and, when comparing its historical volatility, ITV plc is 1.4 times less risky than Tegna. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Tegna Inc is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,549  in Tegna Inc on February 7, 2024 and sell it today you would lose (132.00) from holding Tegna Inc or give up 8.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ITV plc  vs.  Tegna Inc

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 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.

Tegna Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tegna Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Tegna is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ITV Plc and Tegna

The main advantage of trading using opposite ITV Plc and Tegna positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ITV Plc position performs unexpectedly, Tegna 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 Tegna will offset losses from the drop in Tegna's long position.

The idea behind ITV plc and Tegna Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.