Correlation Between Bank of America and Huazhu
Can any of the company-specific risk be diversified away by investing in both Bank of America and Huazhu 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 Huazhu into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Huazhu Group, you can compare the effects of market volatilities on Bank of America and Huazhu 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 Huazhu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Huazhu.
Diversification Opportunities for Bank of America and Huazhu
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Huazhu is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Huazhu Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huazhu Group 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 Bank of America are associated (or correlated) with Huazhu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huazhu Group has no effect on the direction of Bank of America i.e., Bank of America and Huazhu go up and down completely randomly.
Pair Corralation between Bank of America and Huazhu
Considering the 90-day investment horizon Bank of America is expected to generate 0.6 times more return on investment than Huazhu. However, Bank of America is 1.67 times less risky than Huazhu. It trades about 0.06 of its potential returns per unit of risk. Huazhu Group is currently generating about 0.0 per unit of risk. If you would invest 3,138 in Bank of America on August 27, 2024 and sell it today you would earn a total of 1,562 from holding Bank of America or generate 49.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Huazhu Group
Performance |
| Timeline |
| Bank of America |
| Huazhu Group |
Bank of America and Huazhu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Huazhu
The main advantage of trading using opposite Bank of America and Huazhu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Huazhu 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 Huazhu will offset losses from the drop in Huazhu's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Huazhu vs. GreenTree Hospitality Group | Huazhu vs. Soho House Co | Huazhu vs. InterContinental Hotels Group | Huazhu vs. The Intergroup |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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