Correlation Between JAPAN TOBACCO and Entravision Communications

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

By analyzing existing cross correlation between JAPAN TOBACCO UNSPADR12 and Entravision Communications, you can compare the effects of market volatilities on JAPAN TOBACCO 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 JAPAN TOBACCO with a short position of Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN TOBACCO and Entravision Communications.

Diversification Opportunities for JAPAN TOBACCO and Entravision Communications

0.36

Correlation Coefficient

JAPAN TOBACCO  Entravision Communications

Weak diversification

The 3 months correlation between JAPAN and Entravision is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN TOBACCO UNSPADR12 and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12 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 JAPAN TOBACCO i.e., JAPAN TOBACCO and Entravision Communications go up and down completely randomly.

Pair Corralation between JAPAN TOBACCO and Entravision Communications

Assuming the 90 days trading horizon JAPAN TOBACCO UNSPADR12 is expected to under-perform the Entravision Communications. But the stock apears to be less risky and, when comparing its historical volatility, JAPAN TOBACCO UNSPADR12 is 3.87 times less risky than Entravision Communications. The stock trades about -0.16 of its potential returns per unit of risk. The Entravision Communications is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  223.00  in Entravision Communications on December 1, 2024 and sell it today you would lose (13.00) from holding Entravision Communications or give up 5.83% of portfolio value over 90 days.

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

JAPAN TOBACCO UNSPADR12  vs.  Entravision Communications

JAPAN TOBACCO UNSPADR12

Risk-Adjusted Performance

Very Weak

Over the last 90 days JAPAN TOBACCO UNSPADR12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Entravision Communications

Risk-Adjusted Performance

Very Weak

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

Pair Trading with JAPAN TOBACCO and Entravision Communications

The main advantage of trading using opposite JAPAN TOBACCO and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN TOBACCO 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 JAPAN TOBACCO UNSPADR12 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..