Correlation Between Entravision Communications and ASML Holding

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

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

Diversification Opportunities for Entravision Communications and ASML Holding

-0.73

Correlation Coefficient

Entravision Communications  ASML Holding

Pay attention - limited upside

The 3 months correlation between Entravision and ASML is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV and Entravision Communications 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 Entravision Communications are associated (or correlated) with ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of Entravision Communications i.e., Entravision Communications and ASML Holding go up and down completely randomly.

Pair Corralation between Entravision Communications and ASML Holding

Assuming the 90 days horizon Entravision Communications is expected to generate 0.96 times more return on investment than ASML Holding. However, Entravision Communications is 1.04 times less risky than ASML Holding. It trades about 0.16 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.01 per unit of risk. If you would invest  171.00  in Entravision Communications on September 5, 2024 and sell it today you would earn a total of  53.00  from holding Entravision Communications or generate 30.99% return on investment over 90 days.

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

Entravision Communications  vs.  ASML Holding NV

Entravision Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 12 (%) 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.

ASML Holding NV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Entravision Communications and ASML Holding

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

The idea behind Entravision Communications and ASML Holding NV 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.