Correlation Between Entravision Communications and Christian Dior

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

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

Diversification Opportunities for Entravision Communications and Christian Dior

0.29

Correlation Coefficient

Entravision Communications  Christian Dior

Modest diversification

The 3 months correlation between Entravision and Christian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Christian Dior SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Christian Dior SE 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 Christian Dior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Christian Dior SE has no effect on the direction of Entravision Communications i.e., Entravision Communications and Christian Dior go up and down completely randomly.

Pair Corralation between Entravision Communications and Christian Dior

Assuming the 90 days horizon Entravision Communications is expected to under-perform the Christian Dior. In addition to that, Entravision Communications is 2.56 times more volatile than Christian Dior SE. It trades about -0.02 of its total potential returns per unit of risk. Christian Dior SE is currently generating about -0.05 per unit of volatility. If you would invest  59,800  in Christian Dior SE on December 24, 2024 and sell it today you would lose (4,250) from holding Christian Dior SE or give up 7.11% 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.  Christian Dior 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 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.

Christian Dior SE

Risk-Adjusted Performance

Very Weak

Over the last 90 days Christian Dior SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with Entravision Communications and Christian Dior

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

The idea behind Entravision Communications and Christian Dior 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.