Correlation Between Entravision Communications and Ceres Power
Can any of the company-specific risk be diversified away by investing in both Entravision Communications and Ceres Power 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 Ceres Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entravision Communications and Ceres Power Holdings, you can compare the effects of market volatilities on Entravision Communications and Ceres Power 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 Ceres Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and Ceres Power.
Diversification Opportunities for Entravision Communications and Ceres Power
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Entravision and Ceres is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Ceres Power Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceres Power Holdings 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 Ceres Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceres Power Holdings has no effect on the direction of Entravision Communications i.e., Entravision Communications and Ceres Power go up and down completely randomly.
Pair Corralation between Entravision Communications and Ceres Power
Assuming the 90 days horizon Entravision Communications is expected to generate 0.85 times more return on investment than Ceres Power. However, Entravision Communications is 1.17 times less risky than Ceres Power. It trades about 0.03 of its potential returns per unit of risk. Ceres Power Holdings is currently generating about -0.02 per unit of risk. If you would invest 236.00 in Entravision Communications on September 13, 2024 and sell it today you would earn a total of 2.00 from holding Entravision Communications or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Entravision Communications vs. Ceres Power Holdings
Performance |
| Timeline |
| Entravision Communications |
| Ceres Power Holdings |
Entravision Communications and Ceres Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entravision Communications and Ceres Power
The main advantage of trading using opposite Entravision Communications and Ceres Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entravision Communications position performs unexpectedly, Ceres Power 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 Ceres Power will offset losses from the drop in Ceres Power's long position.The idea behind Entravision Communications and Ceres Power Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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