Correlation Between Entravision Communications and Hexcel

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

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

Diversification Opportunities for Entravision Communications and Hexcel

0.38

Correlation Coefficient

Entravision Communications  Hexcel

Weak diversification

The 3 months correlation between Entravision and Hexcel is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Hexcel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexcel 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 Hexcel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexcel has no effect on the direction of Entravision Communications i.e., Entravision Communications and Hexcel go up and down completely randomly.

Pair Corralation between Entravision Communications and Hexcel

Assuming the 90 days horizon Entravision Communications is expected to under-perform the Hexcel. In addition to that, Entravision Communications is 2.21 times more volatile than Hexcel. It trades about -0.01 of its total potential returns per unit of risk. Hexcel is currently generating about 0.01 per unit of volatility. If you would invest  5,667  in Hexcel on October 5, 2024 and sell it today you would earn a total of  283.00  from holding Hexcel or generate 4.99% return on investment over 90 days.

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

Entravision Communications  vs.  Hexcel

Entravision Communications

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Entravision Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Hexcel

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Hexcel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Hexcel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Entravision Communications and Hexcel

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

The idea behind Entravision Communications and Hexcel 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.