Correlation Between Mirriad Advertising and Entravision Communications

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

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

Diversification Opportunities for Mirriad Advertising and Entravision Communications

-0.06

Correlation Coefficient

Mirriad Advertising  Entravision Communications

Good diversification

The 3 months correlation between Mirriad and Entravision is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Mirriad Advertising plc and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Mirriad Advertising 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 Mirriad Advertising plc 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 Mirriad Advertising i.e., Mirriad Advertising and Entravision Communications go up and down completely randomly.

Pair Corralation between Mirriad Advertising and Entravision Communications

Assuming the 90 days horizon Mirriad Advertising plc is expected to generate 2.64 times more return on investment than Entravision Communications. However, Mirriad Advertising is 2.64 times more volatile than Entravision Communications. It trades about 0.01 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.02 per unit of risk. If you would invest  4.54  in Mirriad Advertising plc on December 4, 2024 and sell it today you would lose (3.88) from holding Mirriad Advertising plc or give up 85.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Mirriad Advertising plc  vs.  Entravision Communications

Mirriad Advertising plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mirriad Advertising plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Mirriad Advertising reported solid returns over the last few months and may actually be approaching a breakup point.

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. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Mirriad Advertising and Entravision Communications

The main advantage of trading using opposite Mirriad Advertising and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mirriad Advertising 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 Mirriad Advertising plc 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.