Correlation Between J+J SNACK and Entravision Communications

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

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

Diversification Opportunities for J+J SNACK and Entravision Communications

0.77

Correlation Coefficient

J+J SNACK  Entravision Communications

Poor diversification

The 3 months correlation between J+J and Entravision is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding JJ SNACK FOODS and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and J+J SNACK 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 JJ SNACK FOODS 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 J+J SNACK i.e., J+J SNACK and Entravision Communications go up and down completely randomly.

Pair Corralation between J+J SNACK and Entravision Communications

Assuming the 90 days trading horizon JJ SNACK FOODS is expected to generate 0.33 times more return on investment than Entravision Communications. However, JJ SNACK FOODS is 3.04 times less risky than Entravision Communications. It trades about 0.03 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.0 per unit of risk. If you would invest  13,784  in JJ SNACK FOODS on October 4, 2024 and sell it today you would earn a total of  1,416  from holding JJ SNACK FOODS or generate 10.27% return on investment over 90 days.

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

JJ SNACK FOODS  vs.  Entravision Communications

JJ SNACK FOODS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JJ SNACK FOODS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, J+J SNACK is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with J+J SNACK and Entravision Communications

The main advantage of trading using opposite J+J SNACK and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if J+J SNACK 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 JJ SNACK FOODS 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.