Correlation Between Bank of America and Hithink RoyalFlush

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

Diversification Opportunities for Bank of America and Hithink RoyalFlush

-0.31

Correlation Coefficient

Bank of America  Hithink RoyalFlush

Very good diversification

The 3 months correlation between Bank and Hithink is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Hithink RoyalFlush Info in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hithink RoyalFlush Info 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 Hithink RoyalFlush. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hithink RoyalFlush Info has no effect on the direction of Bank of America i.e., Bank of America and Hithink RoyalFlush go up and down completely randomly.

Pair Corralation between Bank of America and Hithink RoyalFlush

Considering the 90-day investment horizon Bank of America is expected to under-perform the Hithink RoyalFlush. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 2.22 times less risky than Hithink RoyalFlush. The stock trades about -0.05 of its potential returns per unit of risk. The Hithink RoyalFlush Info is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  30,499  in Hithink RoyalFlush Info on December 30, 2024 and sell it today you would lose (1,016) from holding Hithink RoyalFlush Info or give up 3.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Bank of America  vs.  Hithink RoyalFlush Info

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.

Hithink RoyalFlush Info

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hithink RoyalFlush Info has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hithink RoyalFlush is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of America and Hithink RoyalFlush

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

The idea behind Bank of America and Hithink RoyalFlush Info 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.