Correlation Between Adtalem Global and Entravision Communications

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

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

Diversification Opportunities for Adtalem Global and Entravision Communications

-0.57

Correlation Coefficient

Adtalem Global  Entravision Communications

Excellent diversification

The 3 months correlation between Adtalem and Entravision is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Adtalem Global Education and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Adtalem Global 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 Adtalem Global Education 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 Adtalem Global i.e., Adtalem Global and Entravision Communications go up and down completely randomly.

Pair Corralation between Adtalem Global and Entravision Communications

Assuming the 90 days trading horizon Adtalem Global Education is expected to generate 0.46 times more return on investment than Entravision Communications. However, Adtalem Global Education is 2.18 times less risky than Entravision Communications. It trades about 0.08 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.0 per unit of risk. If you would invest  8,550  in Adtalem Global Education on November 28, 2024 and sell it today you would earn a total of  750.00  from holding Adtalem Global Education or generate 8.77% return on investment over 90 days.

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

Adtalem Global Education  vs.  Entravision Communications

Adtalem Global Education

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adtalem Global Education are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Adtalem Global may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Entravision Communications

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entravision Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Entravision Communications is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Adtalem Global and Entravision Communications

The main advantage of trading using opposite Adtalem Global and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adtalem Global 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 Adtalem Global Education 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.