Correlation Between Entravision Communications and Mirriad Advertising

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

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

Diversification Opportunities for Entravision Communications and Mirriad Advertising

-0.65

Correlation Coefficient

Entravision Communications  Mirriad Advertising

Excellent diversification

The 3 months correlation between Entravision and Mirriad is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Mirriad Advertising plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirriad Advertising plc 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 Mirriad Advertising. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirriad Advertising plc has no effect on the direction of Entravision Communications i.e., Entravision Communications and Mirriad Advertising go up and down completely randomly.

Pair Corralation between Entravision Communications and Mirriad Advertising

Considering the 90-day investment horizon Entravision Communications is expected to generate 0.48 times more return on investment than Mirriad Advertising. However, Entravision Communications is 2.08 times less risky than Mirriad Advertising. It trades about -0.01 of its potential returns per unit of risk. Mirriad Advertising plc is currently generating about -0.04 per unit of risk. If you would invest  394.00  in Entravision Communications on September 14, 2024 and sell it today you would lose (146.00) from holding Entravision Communications or give up 37.06% 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.  Mirriad Advertising plc

Entravision Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 10 (%) 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.

Mirriad Advertising plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Entravision Communications and Mirriad Advertising

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

The idea behind Entravision Communications and Mirriad Advertising plc 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.