Correlation Between John Wiley and Entravision Communications

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

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

Diversification Opportunities for John Wiley and Entravision Communications

-0.6

Correlation Coefficient

John Wiley  Entravision Communications

Excellent diversification

The 3 months correlation between John and Entravision is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding John Wiley Sons and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and John Wiley 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 John Wiley Sons 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 John Wiley i.e., John Wiley and Entravision Communications go up and down completely randomly.

Pair Corralation between John Wiley and Entravision Communications

Given the investment horizon of 90 days John Wiley Sons is expected to generate 0.32 times more return on investment than Entravision Communications. However, John Wiley Sons is 3.12 times less risky than Entravision Communications. It trades about 0.13 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.05 per unit of risk. If you would invest  3,331  in John Wiley Sons on February 3, 2024 and sell it today you would earn a total of  482.00  from holding John Wiley Sons or generate 14.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	74.6%
Values	Daily Returns

John Wiley Sons  vs.  Entravision Communications

John Wiley Sons

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Wiley Sons are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, John Wiley sustained solid returns over the last few months and may actually be approaching a breakup point.

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

Pair Trading with John Wiley and Entravision Communications

The main advantage of trading using opposite John Wiley and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if John Wiley 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 John Wiley Sons 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.