Correlation Between Bank of America and Event Hospitality
Can any of the company-specific risk be diversified away by investing in both Bank of America and Event Hospitality 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 Bank of America and Event Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Event Hospitality and, you can compare the effects of market volatilities on Bank of America and Event Hospitality 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 Bank of America with a short position of Event Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Event Hospitality.
Diversification Opportunities for Bank of America and Event Hospitality
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Event is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Event Hospitality and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Event Hospitality and Bank of America 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 Verizon Communications are associated (or correlated) with Event Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Event Hospitality has no effect on the direction of Bank of America i.e., Bank of America and Event Hospitality go up and down completely randomly.
Pair Corralation between Bank of America and Event Hospitality
Assuming the 90 days trading horizon Bank of America is expected to generate 6.69 times less return on investment than Event Hospitality. But when comparing it to its historical volatility, Verizon Communications is 1.13 times less risky than Event Hospitality. It trades about 0.02 of its potential returns per unit of risk. Event Hospitality and is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 645.00 in Event Hospitality and on September 13, 2024 and sell it today you would earn a total of 60.00 from holding Event Hospitality and or generate 9.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Event Hospitality and
Performance |
| Timeline |
| Verizon Communications |
| Event Hospitality |
Bank of America and Event Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Event Hospitality
The main advantage of trading using opposite Bank of America and Event Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Event Hospitality 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 Event Hospitality will offset losses from the drop in Event Hospitality's long position.| Bank of America vs. Cars Inc | Bank of America vs. Australian Agricultural | Bank of America vs. CarsalesCom | Bank of America vs. ALEFARM BREWING DK 05 |
| Event Hospitality vs. CN MODERN DAIRY | Event Hospitality vs. National Beverage Corp | Event Hospitality vs. Tyson Foods | Event Hospitality vs. Verizon Communications |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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