Correlation Between Bank of America and Stone Ridge

Can any of the company-specific risk be diversified away by investing in both Bank of America and Stone Ridge 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 Stone Ridge 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 Stone Ridge 2049, you can compare the effects of market volatilities on Bank of America and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Stone Ridge.

Diversification Opportunities for Bank of America and Stone Ridge

-0.43

Correlation Coefficient

Bank of America  Stone Ridge

Very good diversification

The 3 months correlation between Bank and Stone is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Stone Ridge 2049 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2049 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2049 has no effect on the direction of Bank of America i.e., Bank of America and Stone Ridge go up and down completely randomly.

Pair Corralation between Bank of America and Stone Ridge

Considering the 90-day investment horizon Bank of America is expected to under-perform the Stone Ridge. In addition to that, Bank of America is 3.54 times more volatile than Stone Ridge 2049. It trades about -0.03 of its total potential returns per unit of risk. Stone Ridge 2049 is currently generating about 0.09 per unit of volatility. If you would invest  16,091  in Stone Ridge 2049 on December 27, 2024 and sell it today you would earn a total of  384.38  from holding Stone Ridge 2049 or generate 2.39% return on investment over 90 days.

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

Bank of America  vs.  Stone Ridge 2049

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.

Stone Ridge 2049

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stone Ridge 2049 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Stone Ridge is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of America and Stone Ridge

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

The idea behind Bank of America and Stone Ridge 2049 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.