Correlation Between Entravision Communications and British American
Can any of the company-specific risk be diversified away by investing in both Entravision Communications and British American 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 British American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entravision Communications and British American Tobacco, you can compare the effects of market volatilities on Entravision Communications and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and British American.
Diversification Opportunities for Entravision Communications and British American
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Entravision and British is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Entravision Communications i.e., Entravision Communications and British American go up and down completely randomly.
Pair Corralation between Entravision Communications and British American
Assuming the 90 days horizon Entravision Communications is expected to under-perform the British American. In addition to that, Entravision Communications is 3.43 times more volatile than British American Tobacco. It trades about 0.0 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.02 per unit of volatility. If you would invest 3,320 in British American Tobacco on September 13, 2024 and sell it today you would earn a total of 316.00 from holding British American Tobacco or generate 9.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entravision Communications vs. British American Tobacco
Performance |
| Timeline |
| Entravision Communications |
| British American Tobacco |
Entravision Communications and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entravision Communications and British American
The main advantage of trading using opposite Entravision Communications and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entravision Communications position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.The idea behind Entravision Communications and British American Tobacco 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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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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