Correlation Between Bank of America and InMode
Can any of the company-specific risk be diversified away by investing in both Bank of America and InMode 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 InMode 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 InMode, you can compare the effects of market volatilities on Bank of America and InMode 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 InMode. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and InMode.
Diversification Opportunities for Bank of America and InMode
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and InMode is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and InMode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMode 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 InMode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InMode has no effect on the direction of Bank of America i.e., Bank of America and InMode go up and down completely randomly.
Pair Corralation between Bank of America and InMode
Considering the 90-day investment horizon Bank of America is expected to under-perform the InMode. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.5 times less risky than InMode. The stock trades about -0.01 of its potential returns per unit of risk. The InMode is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,721 in InMode on December 2, 2024 and sell it today you would earn a total of 151.00 from holding InMode or generate 8.77% 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. InMode
Performance |
Timeline |
Bank of America |
InMode |
Bank of America and InMode Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and InMode
The main advantage of trading using opposite Bank of America and InMode positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, InMode 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 InMode will offset losses from the drop in InMode's long position.Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
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Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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