Correlation Between Bank of America and Eos Energy

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

Diversification Opportunities for Bank of America and Eos Energy

0.66

Correlation Coefficient

Bank of America  Eos Energy

Poor diversification

The 3 months correlation between Bank and Eos is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Eos Energy Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eos Energy Enterprises 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 Eos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eos Energy Enterprises has no effect on the direction of Bank of America i.e., Bank of America and Eos Energy go up and down completely randomly.

Pair Corralation between Bank of America and Eos Energy

Considering the 90-day investment horizon Bank of America is expected to generate 0.24 times more return on investment than Eos Energy. However, Bank of America is 4.22 times less risky than Eos Energy. It trades about -0.02 of its potential returns per unit of risk. Eos Energy Enterprises is currently generating about -0.02 per unit of risk. If you would invest  4,427  in Bank of America on December 26, 2024 and sell it today you would lose (120.00) from holding Bank of America or give up 2.71% of portfolio value over 90 days.

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

Bank of America  vs.  Eos Energy Enterprises

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.

Eos Energy Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eos Energy Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Pair Trading with Bank of America and Eos Energy

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

The idea behind Bank of America and Eos Energy Enterprises 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.