Correlation Between Bank of America and Alta Copper

Can any of the company-specific risk be diversified away by investing in both Bank of America and Alta Copper 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 Alta Copper 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 Alta Copper Corp, you can compare the effects of market volatilities on Bank of America and Alta Copper 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 Alta Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Alta Copper.

Diversification Opportunities for Bank of America and Alta Copper

-0.13

Correlation Coefficient

Bank of America  Alta Copper

Good diversification

The 3 months correlation between Bank and Alta is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Alta Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alta Copper Corp 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 Alta Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alta Copper Corp has no effect on the direction of Bank of America i.e., Bank of America and Alta Copper go up and down completely randomly.

Pair Corralation between Bank of America and Alta Copper

Assuming the 90 days trading horizon Bank of America is expected to generate 0.38 times more return on investment than Alta Copper. However, Bank of America is 2.62 times less risky than Alta Copper. It trades about 0.06 of its potential returns per unit of risk. Alta Copper Corp is currently generating about 0.01 per unit of risk. If you would invest  3,561  in Bank of America on October 11, 2024 and sell it today you would earn a total of  1,039  from holding Bank of America or generate 29.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.58%
Values	Daily Returns

Bank of America  vs.  Alta Copper Corp

Bank of America

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very inconsistent primary indicators, Bank of America displayed solid returns over the last few months and may actually be approaching a breakup point.

Alta Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alta Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong forward indicators, Alta Copper is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bank of America and Alta Copper

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

The idea behind Bank of America and Alta Copper Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.