Correlation Between Entravision Communications and RENTOKIL INITIAL

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

By analyzing existing cross correlation between Entravision Communications and RENTOKIL INITIAL ADR5, you can compare the effects of market volatilities on Entravision Communications and RENTOKIL INITIAL 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 RENTOKIL INITIAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and RENTOKIL INITIAL.

Diversification Opportunities for Entravision Communications and RENTOKIL INITIAL

0.2

Correlation Coefficient

Entravision Communications  RENTOKIL INITIAL

Modest diversification

The 3 months correlation between Entravision and RENTOKIL is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and RENTOKIL INITIAL ADR5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RENTOKIL INITIAL ADR5 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 RENTOKIL INITIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RENTOKIL INITIAL ADR5 has no effect on the direction of Entravision Communications i.e., Entravision Communications and RENTOKIL INITIAL go up and down completely randomly.

Pair Corralation between Entravision Communications and RENTOKIL INITIAL

Assuming the 90 days horizon Entravision Communications is expected to generate 1.8 times more return on investment than RENTOKIL INITIAL. However, Entravision Communications is 1.8 times more volatile than RENTOKIL INITIAL ADR5. It trades about -0.06 of its potential returns per unit of risk. RENTOKIL INITIAL ADR5 is currently generating about -0.15 per unit of risk. If you would invest  237.00  in Entravision Communications on December 11, 2024 and sell it today you would lose (47.00) from holding Entravision Communications or give up 19.83% 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.  RENTOKIL INITIAL ADR5

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

RENTOKIL INITIAL ADR5

Risk-Adjusted Performance

Very Weak

Over the last 90 days RENTOKIL INITIAL ADR5 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Entravision Communications and RENTOKIL INITIAL

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

The idea behind Entravision Communications and RENTOKIL INITIAL ADR5 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.