Correlation Between Bank of America and Edgepoint Cdn

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

Diversification Opportunities for Bank of America and Edgepoint Cdn

BankEdgepointDiversified AwayBankEdgepointDiversified Away100%
0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bank and Edgepoint is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Edgepoint Cdn Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgepoint Cdn Growth 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 Edgepoint Cdn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgepoint Cdn Growth has no effect on the direction of Bank of America i.e., Bank of America and Edgepoint Cdn go up and down completely randomly.

Pair Corralation between Bank of America and Edgepoint Cdn

Considering the 90-day investment horizon Bank of America is expected to generate 2.62 times more return on investment than Edgepoint Cdn. However, Bank of America is 2.62 times more volatile than Edgepoint Cdn Growth. It trades about 0.03 of its potential returns per unit of risk. Edgepoint Cdn Growth is currently generating about 0.04 per unit of risk. If you would invest  4,620  in Bank of America on November 21, 2024 and sell it today you would earn a total of  76.00  from holding Bank of America or generate 1.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy96.67%
ValuesDaily Returns

Bank of America  vs.  Edgepoint Cdn Growth

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -4-20246
JavaScript chart by amCharts 3.21.15BAC 0P0000JO4R
       Timeline  
Bank of America 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb434445464748
Edgepoint Cdn Growth 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Edgepoint Cdn Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. Even with relatively steady forward-looking indicators, Edgepoint Cdn is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb30.630.83131.231.431.631.832

Bank of America and Edgepoint Cdn Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.53-2.64-1.76-0.870.00.871.782.693.614.52 0.51.01.52.0
JavaScript chart by amCharts 3.21.15BAC 0P0000JO4R
       Returns  

Pair Trading with Bank of America and Edgepoint Cdn

The main advantage of trading using opposite Bank of America and Edgepoint Cdn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Edgepoint Cdn 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 Edgepoint Cdn will offset losses from the drop in Edgepoint Cdn's long position.
The idea behind Bank of America and Edgepoint Cdn Growth 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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