Correlation Between Entravision Communications and CompuGroup Medical

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

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

Diversification Opportunities for Entravision Communications and CompuGroup Medical

-0.2

Correlation Coefficient

Entravision Communications  CompuGroup Medical

Good diversification

The 3 months correlation between Entravision and CompuGroup is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and CompuGroup Medical SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompuGroup Medical 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 CompuGroup Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompuGroup Medical has no effect on the direction of Entravision Communications i.e., Entravision Communications and CompuGroup Medical go up and down completely randomly.

Pair Corralation between Entravision Communications and CompuGroup Medical

Assuming the 90 days horizon Entravision Communications is expected to generate 1.99 times less return on investment than CompuGroup Medical. In addition to that, Entravision Communications is 1.07 times more volatile than CompuGroup Medical SE. It trades about 0.06 of its total potential returns per unit of risk. CompuGroup Medical SE is currently generating about 0.12 per unit of volatility. If you would invest  1,414  in CompuGroup Medical SE on December 5, 2024 and sell it today you would earn a total of  836.00  from holding CompuGroup Medical SE or generate 59.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Entravision Communications  vs.  CompuGroup Medical SE

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.

CompuGroup Medical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CompuGroup Medical SE are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CompuGroup Medical unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entravision Communications and CompuGroup Medical

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

The idea behind Entravision Communications and CompuGroup Medical SE 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 Stocks Directory module to find actively traded stocks across global markets.