Correlation Between Entravision Communications and Coca Cola

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

By analyzing existing cross correlation between Entravision Communications and Coca Cola HBC, you can compare the effects of market volatilities on Entravision Communications and Coca Cola 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 Coca Cola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and Coca Cola.

Diversification Opportunities for Entravision Communications and Coca Cola

-0.77

Correlation Coefficient

Entravision Communications  Coca Cola

Pay attention - limited upside

The 3 months correlation between Entravision and Coca is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Coca Cola HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola HBC 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 Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola HBC has no effect on the direction of Entravision Communications i.e., Entravision Communications and Coca Cola go up and down completely randomly.

Pair Corralation between Entravision Communications and Coca Cola

Assuming the 90 days horizon Entravision Communications is expected to under-perform the Coca Cola. In addition to that, Entravision Communications is 2.82 times more volatile than Coca Cola HBC. It trades about -0.02 of its total potential returns per unit of risk. Coca Cola HBC is currently generating about 0.22 per unit of volatility. If you would invest  3,282  in Coca Cola HBC on December 27, 2024 and sell it today you would earn a total of  850.00  from holding Coca Cola HBC or generate 25.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Entravision Communications  vs.  Coca Cola HBC

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 latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Coca Cola HBC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola HBC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Coca Cola reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entravision Communications and Coca Cola

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

The idea behind Entravision Communications and Coca Cola HBC 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.