Correlation Between Compania Cervecerias and Entravision Communications

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

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

Diversification Opportunities for Compania Cervecerias and Entravision Communications

-0.03

Correlation Coefficient

Compania Cervecerias  Entravision Communications

Good diversification

The 3 months correlation between Compania and Entravision is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Compania Cervecerias 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 Compania Cervecerias Unidas 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 Compania Cervecerias i.e., Compania Cervecerias and Entravision Communications go up and down completely randomly.

Pair Corralation between Compania Cervecerias and Entravision Communications

Considering the 90-day investment horizon Compania Cervecerias Unidas is expected to generate 0.39 times more return on investment than Entravision Communications. However, Compania Cervecerias Unidas is 2.59 times less risky than Entravision Communications. It trades about 0.02 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.02 per unit of risk. If you would invest  1,146  in Compania Cervecerias Unidas on September 30, 2024 and sell it today you would earn a total of  4.00  from holding Compania Cervecerias Unidas or generate 0.35% return on investment over 90 days.

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

Compania Cervecerias Unidas  vs.  Entravision Communications

Compania Cervecerias

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania Cervecerias Unidas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Compania Cervecerias is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Entravision Communications

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Entravision Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compania Cervecerias and Entravision Communications

The main advantage of trading using opposite Compania Cervecerias and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania Cervecerias 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 Compania Cervecerias Unidas 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.