Correlation Between Marchex and Entravision Communications

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

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

Diversification Opportunities for Marchex and Entravision Communications

-0.39

Correlation Coefficient

Marchex  Entravision Communications

Very good diversification

The 3 months correlation between Marchex and Entravision is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Marchex and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Marchex 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 Marchex 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 Marchex i.e., Marchex and Entravision Communications go up and down completely randomly.

Pair Corralation between Marchex and Entravision Communications

Given the investment horizon of 90 days Marchex is expected to under-perform the Entravision Communications. In addition to that, Marchex is 1.17 times more volatile than Entravision Communications. It trades about -0.01 of its total potential returns per unit of risk. Entravision Communications is currently generating about 0.1 per unit of volatility. If you would invest  203.00  in Entravision Communications on August 30, 2024 and sell it today you would earn a total of  37.00  from holding Entravision Communications or generate 18.23% return on investment over 90 days.

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

Marchex  vs.  Entravision Communications

Marchex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marchex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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. 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 Marchex and Entravision Communications

The main advantage of trading using opposite Marchex and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marchex 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 Marchex 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.