Correlation Between Entravision Communications and Fresenius
Can any of the company-specific risk be diversified away by investing in both Entravision Communications and Fresenius 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 Fresenius into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Entravision Communications and Fresenius SE Co, you can compare the effects of market volatilities on Entravision Communications and Fresenius 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 Fresenius. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and Fresenius.
Diversification Opportunities for Entravision Communications and Fresenius
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Entravision and Fresenius is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Fresenius SE Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius SE 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 Fresenius. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius SE has no effect on the direction of Entravision Communications i.e., Entravision Communications and Fresenius go up and down completely randomly.
Pair Corralation between Entravision Communications and Fresenius
Assuming the 90 days horizon Entravision Communications is expected to generate 2.41 times less return on investment than Fresenius. In addition to that, Entravision Communications is 3.08 times more volatile than Fresenius SE Co. It trades about 0.03 of its total potential returns per unit of risk. Fresenius SE Co is currently generating about 0.2 per unit of volatility. If you would invest 3,316 in Fresenius SE Co on September 13, 2024 and sell it today you would earn a total of 156.00 from holding Fresenius SE Co or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Entravision Communications vs. Fresenius SE Co
Performance |
| Timeline |
| Entravision Communications |
| Fresenius SE |
Entravision Communications and Fresenius Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Entravision Communications and Fresenius
The main advantage of trading using opposite Entravision Communications and Fresenius positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entravision Communications position performs unexpectedly, Fresenius 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 Fresenius will offset losses from the drop in Fresenius' long position.The idea behind Entravision Communications and Fresenius SE Co 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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