Correlation Between Bank of America and Shinsegae Information

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

Diversification Opportunities for Bank of America and Shinsegae Information

-0.09

Correlation Coefficient

Bank of America  Shinsegae Information

Good diversification

The 3 months correlation between Bank and Shinsegae is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Shinsegae Information Communic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shinsegae Information 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 Shinsegae Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shinsegae Information has no effect on the direction of Bank of America i.e., Bank of America and Shinsegae Information go up and down completely randomly.

Pair Corralation between Bank of America and Shinsegae Information

Considering the 90-day investment horizon Bank of America is expected to under-perform the Shinsegae Information. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 4.93 times less risky than Shinsegae Information. The stock trades about -0.01 of its potential returns per unit of risk. The Shinsegae Information Communication is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  853,902  in Shinsegae Information Communication on December 1, 2024 and sell it today you would earn a total of  385,098  from holding Shinsegae Information Communication or generate 45.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Bank of America  vs.  Shinsegae Information Communic

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 rather sound basic indicators, Bank of America is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Shinsegae Information

Risk-Adjusted Performance

OK

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

Pair Trading with Bank of America and Shinsegae Information

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

The idea behind Bank of America and Shinsegae Information Communication 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.