Correlation Between Air Transport and Entravision Communications

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

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

Diversification Opportunities for Air Transport and Entravision Communications

0.93

Correlation Coefficient

Air Transport  Entravision Communications

Almost no diversification

The 3 months correlation between Air and Entravision is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Air Transport Services and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Air Transport 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 Air Transport Services 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 Air Transport i.e., Air Transport and Entravision Communications go up and down completely randomly.

Pair Corralation between Air Transport and Entravision Communications

Assuming the 90 days horizon Air Transport Services is expected to generate 1.2 times more return on investment than Entravision Communications. However, Air Transport is 1.2 times more volatile than Entravision Communications. It trades about 0.22 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.15 per unit of risk. If you would invest  1,320  in Air Transport Services on September 12, 2024 and sell it today you would earn a total of  760.00  from holding Air Transport Services or generate 57.58% return on investment over 90 days.

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

Air Transport Services  vs.  Entravision Communications

Air Transport Services

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Entravision Communications

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 11 (%) 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 Air Transport and Entravision Communications

The main advantage of trading using opposite Air Transport and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Transport 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 Air Transport Services 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.