Correlation Between Bank of America and PlayAGS

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

Diversification Opportunities for Bank of America and PlayAGS

0.55

Correlation Coefficient

Bank of America  PlayAGS

Very weak diversification

The 3 months correlation between Bank and PlayAGS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and PlayAGS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PlayAGS 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 PlayAGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PlayAGS has no effect on the direction of Bank of America i.e., Bank of America and PlayAGS go up and down completely randomly.

Pair Corralation between Bank of America and PlayAGS

Considering the 90-day investment horizon Bank of America is expected to generate 1.53 times less return on investment than PlayAGS. In addition to that, Bank of America is 3.05 times more volatile than PlayAGS. It trades about 0.03 of its total potential returns per unit of risk. PlayAGS is currently generating about 0.15 per unit of volatility. If you would invest  1,171  in PlayAGS on November 19, 2024 and sell it today you would earn a total of  38.00  from holding PlayAGS or generate 3.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  PlayAGS

Bank of America

Risk-Adjusted Performance

Weak

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.

PlayAGS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PlayAGS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, PlayAGS is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and PlayAGS

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

The idea behind Bank of America and PlayAGS 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.