Correlation Between Entravision Communications and PENN NATL

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

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

Diversification Opportunities for Entravision Communications and PENN NATL

0.44

Correlation Coefficient

Entravision Communications  PENN NATL

Very weak diversification

The 3 months correlation between Entravision and PENN is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and PENN NATL GAMING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PENN NATL GAMING 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 PENN NATL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PENN NATL GAMING has no effect on the direction of Entravision Communications i.e., Entravision Communications and PENN NATL go up and down completely randomly.

Pair Corralation between Entravision Communications and PENN NATL

Assuming the 90 days horizon Entravision Communications is expected to generate 1.62 times more return on investment than PENN NATL. However, Entravision Communications is 1.62 times more volatile than PENN NATL GAMING. It trades about -0.02 of its potential returns per unit of risk. PENN NATL GAMING is currently generating about -0.05 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	Weak
Accuracy	100.0%
Values	Daily Returns

Entravision Communications  vs.  PENN NATL GAMING

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.

PENN NATL GAMING

Risk-Adjusted Performance

Very Weak

Over the last 90 days PENN NATL GAMING has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Entravision Communications and PENN NATL

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

The idea behind Entravision Communications and PENN NATL GAMING 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.