Correlation Between IHeartMedia and Salem Media

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

By analyzing existing cross correlation between iHeartMedia Class A and Salem Media Group, you can compare the effects of market volatilities on IHeartMedia and Salem Media 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 IHeartMedia with a short position of Salem Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of IHeartMedia and Salem Media.

Diversification Opportunities for IHeartMedia and Salem Media

-0.56

Correlation Coefficient

IHeartMedia  Salem Media

Excellent diversification

The 3 months correlation between IHeartMedia and Salem is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding iHeartMedia Class A and Salem Media Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salem Media Group and IHeartMedia 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 iHeartMedia Class A are associated (or correlated) with Salem Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salem Media Group has no effect on the direction of IHeartMedia i.e., IHeartMedia and Salem Media go up and down completely randomly.

Pair Corralation between IHeartMedia and Salem Media

Given the investment horizon of 90 days iHeartMedia Class A is expected to under-perform the Salem Media. In addition to that, IHeartMedia is 1.97 times more volatile than Salem Media Group. It trades about 0.0 of its total potential returns per unit of risk. Salem Media Group is currently generating about 0.01 per unit of volatility. If you would invest  102.00  in Salem Media Group on September 14, 2024 and sell it today you would lose (4.00) from holding Salem Media Group or give up 3.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	29.09%
Values	Daily Returns

iHeartMedia Class A  vs.  Salem Media Group

iHeartMedia Class

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iHeartMedia Class A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, IHeartMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Salem Media Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salem Media Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Salem Media is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IHeartMedia and Salem Media

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

The idea behind iHeartMedia Class A and Salem Media Group 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.