Correlation Between Bank of America and Rimac Seguros

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

Diversification Opportunities for Bank of America and Rimac Seguros

0.44

Correlation Coefficient

Bank of America  Rimac Seguros

Very weak diversification

The 3 months correlation between Bank and Rimac is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Rimac Seguros y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rimac Seguros y 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 Rimac Seguros. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rimac Seguros y has no effect on the direction of Bank of America i.e., Bank of America and Rimac Seguros go up and down completely randomly.

Pair Corralation between Bank of America and Rimac Seguros

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Rimac Seguros. In addition to that, Bank of America is 1.18 times more volatile than Rimac Seguros y. It trades about -0.04 of its total potential returns per unit of risk. Rimac Seguros y is currently generating about 0.01 per unit of volatility. If you would invest  95.00  in Rimac Seguros y on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Rimac Seguros y or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.41%
Values	Daily Returns

Bank of America  vs.  Rimac Seguros y

Bank of America

Risk-Adjusted Performance

Very Weak

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 healthy primary indicators, Bank of America is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Rimac Seguros y

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rimac Seguros y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Rimac Seguros is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of America and Rimac Seguros

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

The idea behind Bank of America and Rimac Seguros y 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.