Correlation Between British American and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both British American 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 British American and Entravision Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between British American Tobacco and Entravision Communications, you can compare the effects of market volatilities on British American 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 British American with a short position of Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of British American and Entravision Communications.
Diversification Opportunities for British American and Entravision Communications
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between British and Entravision is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding British American Tobacco and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and British American 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 British American Tobacco 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 British American i.e., British American and Entravision Communications go up and down completely randomly.
Pair Corralation between British American and Entravision Communications
Assuming the 90 days trading horizon British American Tobacco is expected to generate 0.29 times more return on investment than Entravision Communications. However, British American Tobacco is 3.43 times less risky than Entravision Communications. It trades about 0.02 of its potential returns per unit of risk. Entravision Communications is currently generating about -0.01 per unit of risk. If you would invest 3,273 in British American Tobacco on September 5, 2024 and sell it today you would earn a total of 275.00 from holding British American Tobacco or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
British American Tobacco vs. Entravision Communications
Performance |
| Timeline |
| British American Tobacco |
| Entravision Communications |
British American and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with British American and Entravision Communications
The main advantage of trading using opposite British American and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if British American 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.| British American vs. British American Tobacco | British American vs. JAPAN TOBACCO UNSPADR12 | British American vs. Imperial Brands PLC |
| 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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