Correlation Between ProSiebenSat1 Media and ITV Plc

Can any of the company-specific risk be diversified away by investing in both ProSiebenSat1 Media 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 ProSiebenSat1 Media and ITV Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ProSiebenSat1 Media AG and ITV plc, you can compare the effects of market volatilities on ProSiebenSat1 Media 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 ProSiebenSat1 Media with a short position of ITV Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of ProSiebenSat1 Media and ITV Plc.

Diversification Opportunities for ProSiebenSat1 Media and ITV Plc

0.67

Correlation Coefficient

ProSiebenSat1 Media  ITV Plc

Poor diversification

The 3 months correlation between ProSiebenSat1 and ITV is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ProSiebenSat1 Media AG and ITV plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITV plc and ProSiebenSat1 Media 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 ProSiebenSat1 Media AG 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 ProSiebenSat1 Media i.e., ProSiebenSat1 Media and ITV Plc go up and down completely randomly.

Pair Corralation between ProSiebenSat1 Media and ITV Plc

Assuming the 90 days horizon ProSiebenSat1 Media AG is expected to under-perform the ITV Plc. But the pink sheet apears to be less risky and, when comparing its historical volatility, ProSiebenSat1 Media AG is 1.3 times less risky than ITV Plc. The pink sheet trades about -0.01 of its potential returns per unit of risk. The ITV plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  94.00  in ITV plc on September 12, 2024 and sell it today you would lose (13.00) from holding ITV plc or give up 13.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	74.9%
Values	Daily Returns

ProSiebenSat1 Media AG  vs.  ITV plc

ProSiebenSat1 Media

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProSiebenSat1 Media AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, ProSiebenSat1 Media is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 ProSiebenSat1 Media and ITV Plc

The main advantage of trading using opposite ProSiebenSat1 Media and ITV Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ProSiebenSat1 Media 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 ProSiebenSat1 Media AG 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.