Correlation Between Bank of America and Bank Of Queensland Ltd

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

Diversification Opportunities for Bank of America and Bank Of Queensland Ltd

0.87

Correlation Coefficient

Bank of America  Bank Of Queensland Ltd

Very poor diversification

The 3 months correlation between Bank and Bank is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Bank Of Queensland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of Queensland Ltd 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 Bank Of Queensland Ltd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of Queensland Ltd has no effect on the direction of Bank of America i.e., Bank of America and Bank Of Queensland Ltd go up and down completely randomly.

Pair Corralation between Bank of America and Bank Of Queensland Ltd

Considering the 90-day investment horizon Bank of America is expected to under-perform the Bank Of Queensland Ltd. In addition to that, Bank of America is 1.61 times more volatile than Bank Of Queensland. It trades about -0.02 of its total potential returns per unit of risk. Bank Of Queensland is currently generating about 0.0 per unit of volatility. If you would invest  670.00  in Bank Of Queensland on December 27, 2024 and sell it today you would lose (1.00) from holding Bank Of Queensland or give up 0.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	96.77%
Values	Daily Returns

Bank of America  vs.  Bank Of Queensland

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.

Bank Of Queensland Ltd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank Of Queensland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bank Of Queensland Ltd is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and Bank Of Queensland Ltd

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

The idea behind Bank of America and Bank Of Queensland 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.