Correlation Between Entravision Communications and Disney

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

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

Diversification Opportunities for Entravision Communications and Disney

-0.72

Correlation Coefficient

Entravision Communications  Disney

Pay attention - limited upside

The 3 months correlation between Entravision and Disney is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney and Entravision Communications 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 Entravision Communications are associated (or correlated) with Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Entravision Communications i.e., Entravision Communications and Disney go up and down completely randomly.

Pair Corralation between Entravision Communications and Disney

Considering the 90-day investment horizon Entravision Communications is expected to under-perform the Disney. In addition to that, Entravision Communications is 2.09 times more volatile than Walt Disney. It trades about -0.01 of its total potential returns per unit of risk. Walt Disney is currently generating about 0.03 per unit of volatility. If you would invest  9,684  in Walt Disney on January 30, 2024 and sell it today you would earn a total of  1,589  from holding Walt Disney or generate 16.41% return on investment over 90 days.

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

Entravision Communications  vs.  Walt Disney

Entravision Communications

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Walt Disney

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Walt Disney are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entravision Communications and Disney

The main advantage of trading using opposite Entravision Communications and Disney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entravision Communications position performs unexpectedly, Disney 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 Disney will offset losses from the drop in Disney's long position.

The idea behind Entravision Communications and Walt Disney 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.