Correlation Between Bank of America and Axie Infinity

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

Diversification Opportunities for Bank of America and Axie Infinity

0.77

Correlation Coefficient

Bank of America  Axie Infinity

Poor diversification

The 3 months correlation between Bank and Axie is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Axie Infinity Shards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axie Infinity Shards 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 Axie Infinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axie Infinity Shards has no effect on the direction of Bank of America i.e., Bank of America and Axie Infinity go up and down completely randomly.

Pair Corralation between Bank of America and Axie Infinity

Considering the 90-day investment horizon Bank of America is expected to generate 3.91 times less return on investment than Axie Infinity. But when comparing it to its historical volatility, Bank of America is 2.92 times less risky than Axie Infinity. It trades about 0.17 of its potential returns per unit of risk. Axie Infinity Shards is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  445.00  in Axie Infinity Shards on September 1, 2024 and sell it today you would earn a total of  373.00  from holding Axie Infinity Shards or generate 83.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.92%
Values	Daily Returns

Bank of America  vs.  Axie Infinity Shards

Bank of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Axie Infinity Shards

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axie Infinity Shards are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Axie Infinity exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Axie Infinity

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

The idea behind Bank of America and Axie Infinity Shards 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.