Correlation Between Garofalo Health and Entravision Communications

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

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

Diversification Opportunities for Garofalo Health and Entravision Communications

0.08

Correlation Coefficient

Garofalo Health  Entravision Communications

Significant diversification

The 3 months correlation between Garofalo and Entravision is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Garofalo Health Care and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Garofalo Health 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 Garofalo Health Care 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 Garofalo Health i.e., Garofalo Health and Entravision Communications go up and down completely randomly.

Pair Corralation between Garofalo Health and Entravision Communications

Assuming the 90 days horizon Garofalo Health Care is expected to under-perform the Entravision Communications. But the stock apears to be less risky and, when comparing its historical volatility, Garofalo Health Care is 2.87 times less risky than Entravision Communications. The stock trades about -0.02 of its potential returns per unit of risk. The Entravision Communications is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  187.00  in Entravision Communications on October 10, 2024 and sell it today you would earn a total of  43.00  from holding Entravision Communications or generate 22.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Garofalo Health Care  vs.  Entravision Communications

Garofalo Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Garofalo Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Garofalo Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Entravision Communications

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Garofalo Health and Entravision Communications

The main advantage of trading using opposite Garofalo Health and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garofalo Health 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 Garofalo Health Care 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.