Correlation Between Entravision Communications and United Airlines

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

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

Diversification Opportunities for Entravision Communications and United Airlines

0.94

Correlation Coefficient

Entravision Communications  United Airlines

Almost no diversification

The 3 months correlation between Entravision and United is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Entravision Communications i.e., Entravision Communications and United Airlines go up and down completely randomly.

Pair Corralation between Entravision Communications and United Airlines

Assuming the 90 days horizon Entravision Communications is expected to under-perform the United Airlines. In addition to that, Entravision Communications is 1.04 times more volatile than United Airlines Holdings. It trades about -0.05 of its total potential returns per unit of risk. United Airlines Holdings is currently generating about 0.11 per unit of volatility. If you would invest  8,555  in United Airlines Holdings on September 17, 2024 and sell it today you would earn a total of  571.00  from holding United Airlines Holdings or generate 6.67% return on investment over 90 days.

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

Entravision Communications  vs.  United Airlines Holdings

Entravision Communications

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

United Airlines Holdings

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in United Airlines Holdings are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, United Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entravision Communications and United Airlines

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

The idea behind Entravision Communications and United Airlines 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.