Correlation Between Entravision Communications and Digital Media

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

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

Diversification Opportunities for Entravision Communications and Digital Media

-0.87

Correlation Coefficient

Entravision Communications  Digital Media

Pay attention - limited upside

The 3 months correlation between Entravision and Digital is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Digital Media Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Media Solutions 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 Digital Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Media Solutions has no effect on the direction of Entravision Communications i.e., Entravision Communications and Digital Media go up and down completely randomly.

Pair Corralation between Entravision Communications and Digital Media

If you would invest  193.00  in Entravision Communications on September 5, 2024 and sell it today you would earn a total of  47.00  from holding Entravision Communications or generate 24.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Entravision Communications  vs.  Digital Media Solutions

Entravision Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 10 (%) 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.

Digital Media Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Media Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Digital Media is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Entravision Communications and Digital Media

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

The idea behind Entravision Communications and Digital Media Solutions 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.