Correlation Between Entravision Communications and Li-FT Power

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

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

Diversification Opportunities for Entravision Communications and Li-FT Power

0.66

Correlation Coefficient

Entravision Communications  Li-FT Power

Poor diversification

The 3 months correlation between Entravision and Li-FT is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Li FT Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li FT Power 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 Li-FT Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li FT Power has no effect on the direction of Entravision Communications i.e., Entravision Communications and Li-FT Power go up and down completely randomly.

Pair Corralation between Entravision Communications and Li-FT Power

Assuming the 90 days horizon Entravision Communications is expected to under-perform the Li-FT Power. But the stock apears to be less risky and, when comparing its historical volatility, Entravision Communications is 1.24 times less risky than Li-FT Power. The stock trades about -0.06 of its potential returns per unit of risk. The Li FT Power is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  175.00  in Li FT Power on December 22, 2024 and sell it today you would lose (33.00) from holding Li FT Power or give up 18.86% of portfolio value over 90 days.

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

Entravision Communications  vs.  Li FT Power

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.

Li FT Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Li FT Power 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 Li-FT Power

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

The idea behind Entravision Communications and Li FT Power 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.