Correlation Between Bank of America and Dometic Group

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

Diversification Opportunities for Bank of America and Dometic Group

0.33

Correlation Coefficient

Bank of America  Dometic Group

Weak diversification

The 3 months correlation between Bank and Dometic is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Dometic Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dometic Group AB 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 Dometic Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dometic Group AB has no effect on the direction of Bank of America i.e., Bank of America and Dometic Group go up and down completely randomly.

Pair Corralation between Bank of America and Dometic Group

Considering the 90-day investment horizon Bank of America is expected to under-perform the Dometic Group. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.97 times less risky than Dometic Group. The stock trades about -0.34 of its potential returns per unit of risk. The Dometic Group AB is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,405  in Dometic Group AB on November 28, 2024 and sell it today you would lose (40.00) from holding Dometic Group AB or give up 0.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Bank of America  vs.  Dometic Group AB

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 latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Dometic Group AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dometic Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, Dometic Group 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 Dometic Group

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

The idea behind Bank of America and Dometic Group AB 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 Transaction History module to view history of all your transactions and understand their impact on performance.