Correlation Between Disney and Entravision Communications

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

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

Diversification Opportunities for Disney and Entravision Communications

0.72

Correlation Coefficient

Disney  Entravision Communications

Poor diversification

The 3 months correlation between Disney and Entravision is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Walt Disney and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Disney 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 Walt Disney 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 Disney i.e., Disney and Entravision Communications go up and down completely randomly.

Pair Corralation between Disney and Entravision Communications

Considering the 90-day investment horizon Walt Disney is expected to generate 0.3 times more return on investment than Entravision Communications. However, Walt Disney is 3.32 times less risky than Entravision Communications. It trades about -0.2 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.07 per unit of risk. If you would invest  11,410  in Walt Disney on October 8, 2024 and sell it today you would lose (294.00) from holding Walt Disney or give up 2.58% of portfolio value over 90 days.

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

Walt Disney  vs.  Entravision Communications

Walt Disney

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Entravision Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 8 (%) 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 Disney and Entravision Communications

The main advantage of trading using opposite Disney and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disney 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 Walt Disney 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.