Correlation Between Aferian Plc and ITV PLC

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

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

Diversification Opportunities for Aferian Plc and ITV PLC

0.63

Correlation Coefficient

Aferian Plc  ITV PLC

Poor diversification

The 3 months correlation between Aferian and ITV is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Aferian Plc and ITV PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV PLC ADR and Aferian 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 Aferian Plc 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 ADR has no effect on the direction of Aferian Plc i.e., Aferian Plc and ITV PLC go up and down completely randomly.

Pair Corralation between Aferian Plc and ITV PLC

Assuming the 90 days horizon Aferian Plc is expected to under-perform the ITV PLC. In addition to that, Aferian Plc is 2.48 times more volatile than ITV PLC ADR. It trades about -0.12 of its total potential returns per unit of risk. ITV PLC ADR is currently generating about -0.06 per unit of volatility. If you would invest  1,009  in ITV PLC ADR on September 3, 2024 and sell it today you would lose (107.00) from holding ITV PLC ADR or give up 10.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Aferian Plc  vs.  ITV PLC ADR

Aferian Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aferian 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 fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ITV PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITV PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Aferian Plc and ITV PLC

The main advantage of trading using opposite Aferian Plc and ITV PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aferian Plc 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 Aferian Plc and ITV PLC ADR 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.