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

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Correlation Coefficient

RTL Group  ITV Plc

Pay attention - limited upside

The 3 months correlation between RTL and ITV is 0.0. 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 horizon RTL Group is expected to generate 4.21 times less return on investment than ITV Plc. But when comparing it to its historical volatility, RTL Group SA is 6.89 times less risky than ITV Plc. It trades about 0.07 of its potential returns per unit of risk. ITV plc is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  68.00  in ITV plc on August 29, 2024 and sell it today you would earn a total of  13.00  from holding ITV plc or generate 19.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	94.23%
Values	Daily Returns

RTL Group SA  vs.  ITV plc

RTL Group SA

Risk-Adjusted Performance

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Very Weak

Over the last 90 days RTL Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, RTL Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

The idea behind RTL Group SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.