Correlation Between Global E and Entravision Communications

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

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

Diversification Opportunities for Global E and Entravision Communications

0.66

Correlation Coefficient

Global E  Entravision Communications

Poor diversification

The 3 months correlation between Global and Entravision is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Global E Online and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Global E 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 Global E Online 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 Global E i.e., Global E and Entravision Communications go up and down completely randomly.

Pair Corralation between Global E and Entravision Communications

Given the investment horizon of 90 days Global E Online is expected to generate 0.78 times more return on investment than Entravision Communications. However, Global E Online is 1.29 times less risky than Entravision Communications. It trades about 0.19 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.09 per unit of risk. If you would invest  3,121  in Global E Online on September 19, 2024 and sell it today you would earn a total of  2,341  from holding Global E Online or generate 75.01% return on investment over 90 days.

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

Global E Online  vs.  Entravision Communications

Global E Online

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global E Online are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Global E exhibited solid returns over the last few months and may actually be approaching a breakup point.

Entravision Communications

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 9 (%) 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.

Pair Trading with Global E and Entravision Communications

The main advantage of trading using opposite Global E and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global E 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 Global E Online 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.