Correlation Between Fanhua and Entravision Communications

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

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

Diversification Opportunities for Fanhua and Entravision Communications

-0.72

Correlation Coefficient

Fanhua  Entravision Communications

Pay attention - limited upside

The 3 months correlation between Fanhua and Entravision is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fanhua Inc and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Fanhua 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 Fanhua Inc are associated (or correlated) with Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of Fanhua i.e., Fanhua and Entravision Communications go up and down completely randomly.

Pair Corralation between Fanhua and Entravision Communications

Assuming the 90 days trading horizon Fanhua is expected to generate 27.48 times less return on investment than Entravision Communications. In addition to that, Fanhua is 1.22 times more volatile than Entravision Communications. It trades about 0.0 of its total potential returns per unit of risk. Entravision Communications is currently generating about 0.05 per unit of volatility. If you would invest  217.00  in Entravision Communications on October 8, 2024 and sell it today you would earn a total of  5.00  from holding Entravision Communications or generate 2.3% return on investment over 90 days.

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

Fanhua Inc  vs.  Entravision Communications

Fanhua Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fanhua Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Entravision Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fanhua and Entravision Communications

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

The idea behind Fanhua Inc and Entravision Communications 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.