Correlation Between AAC TECHNOLOGHLDGADR and Bank of America Corp

Can any of the company-specific risk be diversified away by investing in both AAC TECHNOLOGHLDGADR and Bank of America Corp 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 AAC TECHNOLOGHLDGADR and Bank of America Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AAC TECHNOLOGHLDGADR and Bank of America, you can compare the effects of market volatilities on AAC TECHNOLOGHLDGADR and Bank of America Corp 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 AAC TECHNOLOGHLDGADR with a short position of Bank of America Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAC TECHNOLOGHLDGADR and Bank of America Corp.

Diversification Opportunities for AAC TECHNOLOGHLDGADR and Bank of America Corp

0.58

Correlation Coefficient

AAC TECHNOLOGHLDGADR  Bank of America Corp

Very weak diversification

The 3 months correlation between AAC and Bank is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding AAC TECHNOLOGHLDGADR and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America Corp and AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR are associated (or correlated) with Bank of America Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America Corp has no effect on the direction of AAC TECHNOLOGHLDGADR i.e., AAC TECHNOLOGHLDGADR and Bank of America Corp go up and down completely randomly.

Pair Corralation between AAC TECHNOLOGHLDGADR and Bank of America Corp

Assuming the 90 days horizon AAC TECHNOLOGHLDGADR is expected to generate 3.52 times less return on investment than Bank of America Corp. In addition to that, AAC TECHNOLOGHLDGADR is 2.64 times more volatile than Bank of America. It trades about 0.02 of its total potential returns per unit of risk. Bank of America is currently generating about 0.15 per unit of volatility. If you would invest  4,347  in Bank of America on October 12, 2024 and sell it today you would earn a total of  132.00  from holding Bank of America or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

AAC TECHNOLOGHLDGADR  vs.  Bank of America

AAC TECHNOLOGHLDGADR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAC TECHNOLOGHLDGADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AAC TECHNOLOGHLDGADR reported solid returns over the last few months and may actually be approaching a breakup point.

Bank of America Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Bank of America Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AAC TECHNOLOGHLDGADR and Bank of America Corp

The main advantage of trading using opposite AAC TECHNOLOGHLDGADR and Bank of America Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAC TECHNOLOGHLDGADR position performs unexpectedly, Bank of America Corp 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 Bank of America Corp will offset losses from the drop in Bank of America Corp's long position.

The idea behind AAC TECHNOLOGHLDGADR and Bank of America 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.