Correlation Between Entravision Communications and Digital China

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

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

Diversification Opportunities for Entravision Communications and Digital China

0.33

Correlation Coefficient

Entravision Communications  Digital China

Weak diversification

The 3 months correlation between Entravision and Digital is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Digital China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital China Holdings 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 Digital China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital China Holdings has no effect on the direction of Entravision Communications i.e., Entravision Communications and Digital China go up and down completely randomly.

Pair Corralation between Entravision Communications and Digital China

Assuming the 90 days horizon Entravision Communications is expected to generate 1.33 times more return on investment than Digital China. However, Entravision Communications is 1.33 times more volatile than Digital China Holdings. It trades about -0.02 of its potential returns per unit of risk. Digital China Holdings is currently generating about -0.06 per unit of risk. If you would invest  220.00  in Entravision Communications on December 24, 2024 and sell it today you would lose (28.00) from holding Entravision Communications or give up 12.73% of portfolio value over 90 days.

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

Entravision Communications  vs.  Digital China Holdings

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 fragile 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.

Digital China Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Digital China Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Entravision Communications and Digital China

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

The idea behind Entravision Communications and Digital China Holdings 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.