Correlation Between Bank of America and Terran Orbital

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

Diversification Opportunities for Bank of America and Terran Orbital

0.0

Correlation Coefficient

Bank of America  Terran Orbital

Pay attention - limited upside

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

Pair Corralation between Bank of America and Terran Orbital

Considering the 90-day investment horizon Bank of America is expected to generate 0.22 times more return on investment than Terran Orbital. However, Bank of America is 4.57 times less risky than Terran Orbital. It trades about 0.05 of its potential returns per unit of risk. Terran Orbital Corp is currently generating about -0.03 per unit of risk. If you would invest  3,246  in Bank of America on October 12, 2024 and sell it today you would earn a total of  1,375  from holding Bank of America or generate 42.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	90.3%
Values	Daily Returns

Bank of America  vs.  Terran Orbital Corp

Bank of America

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Terran Orbital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terran Orbital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Terran Orbital is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bank of America and Terran Orbital

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

The idea behind Bank of America and Terran Orbital Corp 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.