Correlation Between Bank of America and Entravision Communications
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Entravision Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Entravision Communications, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Entravision Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Entravision Communications.
Diversification Opportunities for Bank of America and Entravision Communications
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Entravision is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Entravision Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entravision Communications 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 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 Bank of America i.e., Bank of America and Entravision Communications go up and down completely randomly.
Pair Corralation between Bank of America and Entravision Communications
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.31 times more return on investment than Entravision Communications. However, Verizon Communications is 3.23 times less risky than Entravision Communications. It trades about 0.36 of its potential returns per unit of risk. Entravision Communications is currently generating about 0.07 per unit of risk. If you would invest 3,801 in Verizon Communications on August 31, 2024 and sell it today you would earn a total of 399.00 from holding Verizon Communications or generate 10.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Verizon Communications vs. Entravision Communications
Performance |
| Timeline |
| Verizon Communications |
| Entravision Communications |
Bank of America and Entravision Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Entravision Communications
The main advantage of trading using opposite Bank of America and Entravision Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Entravision Communications | Bank of America vs. Citic Telecom International | Bank of America vs. UET United Electronic | Bank of America vs. Nucletron Electronic Aktiengesellschaft |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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