Correlation Between Bank of America and ERAMET SA

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

Diversification Opportunities for Bank of America and ERAMET SA

0.21

Correlation Coefficient

Bank of America  ERAMET SA

Modest diversification

The 3 months correlation between Bank and ERAMET is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ERAMET SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ERAMET SA 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 ERAMET SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ERAMET SA has no effect on the direction of Bank of America i.e., Bank of America and ERAMET SA go up and down completely randomly.

Pair Corralation between Bank of America and ERAMET SA

If you would invest  5,729  in ERAMET SA on December 1, 2024 and sell it today you would earn a total of  0.00  from holding ERAMET SA or generate 0.0% return on investment over 90 days.

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

Bank of America  vs.  ERAMET SA

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.

ERAMET SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ERAMET SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, ERAMET SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank of America and ERAMET SA

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

The idea behind Bank of America and ERAMET SA 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.