Correlation Between Bank of America and Hemisphere Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and Hemisphere Energy 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 Hemisphere Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Hemisphere Energy Corp, you can compare the effects of market volatilities on Bank of America and Hemisphere Energy 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 Hemisphere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Hemisphere Energy.
Diversification Opportunities for Bank of America and Hemisphere Energy
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Hemisphere is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Hemisphere Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hemisphere Energy Corp 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 Hemisphere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hemisphere Energy Corp has no effect on the direction of Bank of America i.e., Bank of America and Hemisphere Energy go up and down completely randomly.
Pair Corralation between Bank of America and Hemisphere Energy
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.66 times more return on investment than Hemisphere Energy. However, Verizon Communications is 1.51 times less risky than Hemisphere Energy. It trades about 0.26 of its potential returns per unit of risk. Hemisphere Energy Corp is currently generating about -0.01 per unit of risk. If you would invest 3,857 in Verizon Communications on August 25, 2024 and sell it today you would earn a total of 291.00 from holding Verizon Communications or generate 7.54% 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. Hemisphere Energy Corp
Performance |
| Timeline |
| Verizon Communications |
| Hemisphere Energy Corp |
Bank of America and Hemisphere Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Hemisphere Energy
The main advantage of trading using opposite Bank of America and Hemisphere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Hemisphere Energy 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 Hemisphere Energy will offset losses from the drop in Hemisphere Energy's long position.| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc |
| Hemisphere Energy vs. Apple Inc | Hemisphere Energy vs. Apple Inc | Hemisphere Energy vs. Apple Inc | Hemisphere Energy vs. Apple Inc |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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