Correlation Between Active Health and ITV PLC

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

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

Diversification Opportunities for Active Health and ITV PLC

0.47

Correlation Coefficient

Active Health  ITV PLC

Very weak diversification

The 3 months correlation between Active and ITV is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Active Health Foods 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 Active Health 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 Active Health Foods 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 Active Health i.e., Active Health and ITV PLC go up and down completely randomly.

Pair Corralation between Active Health and ITV PLC

If you would invest  1,069  in ITV PLC ADR on June 24, 2024 and sell it today you would earn a total of  4.00  from holding ITV PLC ADR or generate 0.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Active Health Foods  vs.  ITV PLC ADR

Active Health Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Active Health Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Active Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

ITV PLC ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ITV PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ITV PLC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Active Health and ITV PLC

The main advantage of trading using opposite Active Health and ITV PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Active Health 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 Active Health Foods 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.