Correlation Between Saga Communications and IHeartMedia

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

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

Diversification Opportunities for Saga Communications and IHeartMedia

0.05

Correlation Coefficient

Saga Communications  IHeartMedia

Significant diversification

The 3 months correlation between Saga and IHeartMedia is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Saga Communications and iHeartMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iHeartMedia and Saga 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 Saga Communications are associated (or correlated) with IHeartMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iHeartMedia has no effect on the direction of Saga Communications i.e., Saga Communications and IHeartMedia go up and down completely randomly.

Pair Corralation between Saga Communications and IHeartMedia

Considering the 90-day investment horizon Saga Communications is expected to under-perform the IHeartMedia. But the stock apears to be less risky and, when comparing its historical volatility, Saga Communications is 4.21 times less risky than IHeartMedia. The stock trades about -0.14 of its potential returns per unit of risk. The iHeartMedia is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  150.00  in iHeartMedia on September 12, 2024 and sell it today you would earn a total of  65.00  from holding iHeartMedia or generate 43.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Saga Communications  vs.  iHeartMedia

Saga Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saga Communications 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 technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

iHeartMedia

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iHeartMedia are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, IHeartMedia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Saga Communications and IHeartMedia

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

The idea behind Saga Communications and iHeartMedia 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.