Correlation Between Bank of America and Brera Holdings

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

Diversification Opportunities for Bank of America and Brera Holdings

0.08

Correlation Coefficient

Bank of America  Brera Holdings

Significant diversification

The 3 months correlation between Bank and Brera is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Brera Holdings PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brera Holdings PLC 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 Brera Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brera Holdings PLC has no effect on the direction of Bank of America i.e., Bank of America and Brera Holdings go up and down completely randomly.

Pair Corralation between Bank of America and Brera Holdings

Considering the 90-day investment horizon Bank of America is expected to under-perform the Brera Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 5.79 times less risky than Brera Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The Brera Holdings PLC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  83.00  in Brera Holdings PLC on December 27, 2024 and sell it today you would lose (13.00) from holding Brera Holdings PLC or give up 15.66% of portfolio value over 90 days.

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

Bank of America  vs.  Brera Holdings PLC

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.

Brera Holdings PLC

Risk-Adjusted Performance

Weak

Over the last 90 days Brera Holdings PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Brera Holdings 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 Brera Holdings

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

The idea behind Bank of America and Brera Holdings PLC 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.