Correlation Between Media and Entravision Communications

Can any of the company-specific risk be diversified away by investing in both 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 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 Media and Games and Entravision Communications, you can compare the effects of market volatilities on 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 Media with a short position of Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Media and Entravision Communications.

Diversification Opportunities for Media and Entravision Communications

-0.55

Correlation Coefficient

Media  Entravision Communications

Excellent diversification

The 3 months correlation between Media and Entravision is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Media and Games and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and 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 Media and Games 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 Media i.e., Media and Entravision Communications go up and down completely randomly.

Pair Corralation between Media and Entravision Communications

Assuming the 90 days trading horizon Media and Games is expected to generate 0.77 times more return on investment than Entravision Communications. However, Media and Games is 1.3 times less risky than Entravision Communications. It trades about 0.05 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.02 per unit of risk. If you would invest  318.00  in Media and Games on December 24, 2024 and sell it today you would earn a total of  23.00  from holding Media and Games or generate 7.23% return on investment over 90 days.

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

Media and Games  vs.  Entravision Communications

Media and Games

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Media and Games are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 latest fragile 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.

Pair Trading with Media and Entravision Communications

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