Correlation Between Liberty Media and Entravision Communications

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

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

Diversification Opportunities for Liberty Media and Entravision Communications

0.56

Correlation Coefficient

Liberty Media  Entravision Communications

Very weak diversification

The 3 months correlation between Liberty and Entravision is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Liberty Media 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 Liberty Media are associated (or correlated) with Entravision Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entravision Communications has no effect on the direction of Liberty Media i.e., Liberty Media and Entravision Communications go up and down completely randomly.

Pair Corralation between Liberty Media and Entravision Communications

Assuming the 90 days horizon Liberty Media is expected to under-perform the Entravision Communications. But the stock apears to be less risky and, when comparing its historical volatility, Liberty Media is 5.12 times less risky than Entravision Communications. The stock trades about -0.17 of its potential returns per unit of risk. The Entravision Communications is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Entravision Communications on October 18, 2024 and sell it today you would earn a total of  4.00  from holding Entravision Communications or generate 1.69% return on investment over 90 days.

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

Liberty Media  vs.  Entravision Communications

Liberty Media

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Liberty Media may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Entravision Communications

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Entravision Communications may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Liberty Media and Entravision Communications

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

The idea behind Liberty Media and Entravision Communications 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.