Correlation Between Bank of America and Glanbia PLC

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

Diversification Opportunities for Bank of America and Glanbia PLC

-0.36

Correlation Coefficient

Bank of America  Glanbia PLC

Very good diversification

The 3 months correlation between Bank and Glanbia is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Glanbia PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glanbia PLC ADR 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 Glanbia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glanbia PLC ADR has no effect on the direction of Bank of America i.e., Bank of America and Glanbia PLC go up and down completely randomly.

Pair Corralation between Bank of America and Glanbia PLC

Considering the 90-day investment horizon Bank of America is expected to generate 3.28 times less return on investment than Glanbia PLC. But when comparing it to its historical volatility, Bank of America is 2.31 times less risky than Glanbia PLC. It trades about 0.05 of its potential returns per unit of risk. Glanbia PLC ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  5,196  in Glanbia PLC ADR on September 20, 2024 and sell it today you would earn a total of  4,279  from holding Glanbia PLC ADR or generate 82.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.89%
Values	Daily Returns

Bank of America  vs.  Glanbia PLC ADR

Bank of America

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Glanbia PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Glanbia PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Glanbia PLC 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 Glanbia PLC

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

The idea behind Bank of America and Glanbia PLC ADR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.