Correlation Between Universal Electronics and Entravision Communications

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Can any of the company-specific risk be diversified away by investing in both Universal Electronics 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 Universal Electronics and Entravision Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Electronics and Entravision Communications, you can compare the effects of market volatilities on Universal Electronics 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 Universal Electronics with a short position of Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Electronics and Entravision Communications.

Diversification Opportunities for Universal Electronics and Entravision Communications

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Universal and Entravision is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Universal Electronics and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications and Universal Electronics 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 Universal Electronics 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 Universal Electronics i.e., Universal Electronics and Entravision Communications go up and down completely randomly.

Pair Corralation between Universal Electronics and Entravision Communications

Assuming the 90 days horizon Universal Electronics is expected to generate 1.31 times more return on investment than Entravision Communications. However, Universal Electronics is 1.31 times more volatile than Entravision Communications. It trades about 0.13 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.12 per unit of risk. If you would invest  408.00  in Universal Electronics on April 24, 2025 and sell it today you would earn a total of  142.00  from holding Universal Electronics or generate 34.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Universal Electronics  vs.  Entravision Communications

 Performance 
       Timeline  
Universal Electronics 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Universal Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Universal Electronics reported solid returns over the last few months and may actually be approaching a breakup point.
Entravision Communications 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Entravision Communications are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entravision Communications reported solid returns over the last few months and may actually be approaching a breakup point.

Universal Electronics and Entravision Communications Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Universal Electronics and Entravision Communications

The main advantage of trading using opposite Universal Electronics and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Electronics 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.
The idea behind Universal Electronics and Entravision Communications 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.
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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