Correlation Between Bank of the and Premiere Entertainment
Can any of the company-specific risk be diversified away by investing in both Bank of the and Premiere Entertainment 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 the and Premiere Entertainment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of the and Premiere Entertainment, you can compare the effects of market volatilities on Bank of the and Premiere Entertainment 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 the with a short position of Premiere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of the and Premiere Entertainment.
Diversification Opportunities for Bank of the and Premiere Entertainment
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Premiere is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and Premiere Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premiere Entertainment and Bank of the 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 the are associated (or correlated) with Premiere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premiere Entertainment has no effect on the direction of Bank of the i.e., Bank of the and Premiere Entertainment go up and down completely randomly.
Pair Corralation between Bank of the and Premiere Entertainment
Assuming the 90 days trading horizon Bank of the is expected to under-perform the Premiere Entertainment. But the stock apears to be less risky and, when comparing its historical volatility, Bank of the is 1.82 times less risky than Premiere Entertainment. The stock trades about -0.34 of its potential returns per unit of risk. The Premiere Entertainment is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 19.00 in Premiere Entertainment on September 1, 2024 and sell it today you would lose (1.00) from holding Premiere Entertainment or give up 5.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of the vs. Premiere Entertainment
Performance |
| Timeline |
| Bank of the |
| Premiere Entertainment |
Bank of the and Premiere Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of the and Premiere Entertainment
The main advantage of trading using opposite Bank of the and Premiere Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of the position performs unexpectedly, Premiere Entertainment 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 Premiere Entertainment will offset losses from the drop in Premiere Entertainment's long position.| Bank of the vs. GT Capital Holdings | Bank of the vs. Allhome Corp | Bank of the vs. Jollibee Foods Corp | Bank of the vs. LFM Properties Corp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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