Correlation Between Entravision Communications and Interpublic Group

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

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

Diversification Opportunities for Entravision Communications and Interpublic Group

-0.6

Correlation Coefficient

Entravision Communications  Interpublic Group

Excellent diversification

The 3 months correlation between Entravision and Interpublic is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Interpublic Group of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interpublic Group 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 Interpublic Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interpublic Group has no effect on the direction of Entravision Communications i.e., Entravision Communications and Interpublic Group go up and down completely randomly.

Pair Corralation between Entravision Communications and Interpublic Group

Considering the 90-day investment horizon Entravision Communications is expected to generate 2.65 times more return on investment than Interpublic Group. However, Entravision Communications is 2.65 times more volatile than Interpublic Group of. It trades about -0.01 of its potential returns per unit of risk. Interpublic Group of is currently generating about -0.02 per unit of risk. If you would invest  410.00  in Entravision Communications on September 12, 2024 and sell it today you would lose (153.00) from holding Entravision Communications or give up 37.32% of portfolio value over 90 days.

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

Entravision Communications  vs.  Interpublic Group of

Entravision Communications

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Entravision Communications exhibited solid returns over the last few months and may actually be approaching a breakup point.

Interpublic Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Interpublic Group of are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Interpublic Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Entravision Communications and Interpublic Group

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

The idea behind Entravision Communications and Interpublic Group of 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.