Correlation Between Bank of America and TTW PCL

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

By analyzing existing cross correlation between Verizon Communications and TTW PCL, you can compare the effects of market volatilities on Bank of America and TTW PCL 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 TTW PCL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and TTW PCL.

Diversification Opportunities for Bank of America and TTW PCL

0.0

Correlation Coefficient

Bank of America  TTW PCL

Pay attention - limited upside

The 3 months correlation between Bank and TTW is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and TTW PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTW PCL 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 TTW PCL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTW PCL has no effect on the direction of Bank of America i.e., Bank of America and TTW PCL go up and down completely randomly.

Pair Corralation between Bank of America and TTW PCL

If you would invest  3,268  in Verizon Communications on October 24, 2024 and sell it today you would earn a total of  472.00  from holding Verizon Communications or generate 14.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.2%
Values	Daily Returns

Verizon Communications  vs.  TTW PCL

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Bank of America is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TTW PCL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TTW PCL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, TTW PCL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and TTW PCL

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

The idea behind Verizon Communications and TTW PCL 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.