Correlation Between Entravision Communications and Gray Television

Can any of the company-specific risk be diversified away by investing in both Entravision Communications and Gray Television 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 Gray Television into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Entravision Communications and Gray Television, you can compare the effects of market volatilities on Entravision Communications and Gray Television 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 Gray Television. Check out your portfolio center. Please also check ongoing floating volatility patterns of Entravision Communications and Gray Television.

Diversification Opportunities for Entravision Communications and Gray Television

-0.08

Correlation Coefficient

Entravision Communications  Gray Television

Good diversification

The 3 months correlation between Entravision and Gray is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Entravision Communications and Gray Television in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gray Television 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 Gray Television. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gray Television has no effect on the direction of Entravision Communications i.e., Entravision Communications and Gray Television go up and down completely randomly.

Pair Corralation between Entravision Communications and Gray Television

Considering the 90-day investment horizon Entravision Communications is expected to generate 0.78 times more return on investment than Gray Television. However, Entravision Communications is 1.29 times less risky than Gray Television. It trades about 0.0 of its potential returns per unit of risk. Gray Television is currently generating about -0.04 per unit of risk. If you would invest  211.00  in Entravision Communications on February 23, 2024 and sell it today you would lose (2.00) from holding Entravision Communications or give up 0.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Entravision Communications  vs.  Gray Television

Entravision Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entravision Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Gray Television

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Gray Television are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Gray Television sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entravision Communications and Gray Television

The main advantage of trading using opposite Entravision Communications and Gray Television positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entravision Communications position performs unexpectedly, Gray Television 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 Gray Television will offset losses from the drop in Gray Television's long position.

The idea behind Entravision Communications and Gray Television 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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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.