Correlation Between Emmis Communications and ITV Plc

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

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

Diversification Opportunities for Emmis Communications and ITV Plc

-0.33

Correlation Coefficient

Emmis Communications  ITV Plc

Very good diversification

The 3 months correlation between Emmis and ITV is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Emmis Communications Corp and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc and Emmis Communications 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 Emmis Communications Corp 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 Emmis Communications i.e., Emmis Communications and ITV Plc go up and down completely randomly.

Pair Corralation between Emmis Communications and ITV Plc

Given the investment horizon of 90 days Emmis Communications Corp is expected to under-perform the ITV Plc. In addition to that, Emmis Communications is 1.37 times more volatile than ITV plc. It trades about -0.01 of its total potential returns per unit of risk. ITV plc is currently generating about 0.02 per unit of volatility. If you would invest  82.00  in ITV plc on September 4, 2024 and sell it today you would lose (1.00) from holding ITV plc or give up 1.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.58%
Values	Daily Returns

Emmis Communications Corp  vs.  ITV plc

Emmis Communications Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Emmis Communications Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Emmis Communications is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private 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 weak performance in the last few months, the Stock's basic 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.

Pair Trading with Emmis Communications and ITV Plc

The main advantage of trading using opposite Emmis Communications and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emmis Communications 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 Emmis Communications Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.