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

Bank of the  Premiere Entertainment

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 generate 2.48 times less return on investment than Premiere Entertainment. But when comparing it to its historical volatility, Bank of the is 1.88 times less risky than Premiere Entertainment. It trades about 0.03 of its potential returns per unit of risk. Premiere Entertainment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Premiere Entertainment on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Premiere Entertainment or generate 5.88% return on investment 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

Bank of the

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of the are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Bank of the is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Premiere Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Premiere Entertainment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Premiere Entertainment may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.

The idea behind Bank of the and Premiere Entertainment pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.