Correlation Between Air China and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both Air China 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 Air China and Entravision Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Air China Limited and Entravision Communications, you can compare the effects of market volatilities on Air China 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 Air China with a short position of Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Air China and Entravision Communications.
Diversification Opportunities for Air China and Entravision Communications
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Air and Entravision is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Air China Limited and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Air China 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 Air China Limited 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 Air China i.e., Air China and Entravision Communications go up and down completely randomly.
Pair Corralation between Air China and Entravision Communications
Assuming the 90 days horizon Air China Limited is expected to generate 0.8 times more return on investment than Entravision Communications. However, Air China Limited is 1.26 times less risky than Entravision Communications. It trades about -0.01 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.01 per unit of risk. If you would invest 90.00 in Air China Limited on September 4, 2024 and sell it today you would lose (33.00) from holding Air China Limited or give up 36.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Air China Limited vs. Entravision Communications
Performance |
| Timeline |
| Air China Limited |
| Entravision Communications |
Air China and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Air China and Entravision Communications
The main advantage of trading using opposite Air China and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air China 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.| Air China vs. TRADEDOUBLER AB SK | Air China vs. Auto Trader Group | Air China vs. AUTO TRADER ADR | Air China vs. Fast Retailing Co |
| Entravision Communications vs. News Corporation | Entravision Communications vs. News Corporation | Entravision Communications vs. Superior Plus Corp | Entravision Communications vs. NMI Holdings |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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