Correlation Between Bank of America and KTRA Old

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

Diversification Opportunities for Bank of America and KTRA Old

0.0

Correlation Coefficient

Bank of America  KTRA Old

Pay attention - limited upside

The 3 months correlation between Bank and KTRA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and KTRA Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KTRA Old 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 KTRA Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KTRA Old has no effect on the direction of Bank of America i.e., Bank of America and KTRA Old go up and down completely randomly.

Pair Corralation between Bank of America and KTRA Old

Considering the 90-day investment horizon Bank of America is expected to generate 25.21 times less return on investment than KTRA Old. But when comparing it to its historical volatility, Bank of America is 31.43 times less risky than KTRA Old. It trades about 0.05 of its potential returns per unit of risk. KTRA Old is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  24,675  in KTRA Old on October 27, 2024 and sell it today you would lose (24,045) from holding KTRA Old or give up 97.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	87.04%
Values	Daily Returns

Bank of America  vs.  KTRA Old

Bank of America

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) 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 February 2025.

KTRA Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KTRA Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, KTRA Old 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 KTRA Old

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

The idea behind Bank of America and KTRA Old 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.