Correlation Between Bank of America and Metals X

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

Diversification Opportunities for Bank of America and Metals X

-0.1

Correlation Coefficient

Bank of America  Metals X

Good diversification

The 3 months correlation between Bank and Metals is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Metals X Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metals X Limited 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 Metals X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metals X Limited has no effect on the direction of Bank of America i.e., Bank of America and Metals X go up and down completely randomly.

Pair Corralation between Bank of America and Metals X

Considering the 90-day investment horizon Bank of America is expected to generate 0.42 times more return on investment than Metals X. However, Bank of America is 2.38 times less risky than Metals X. It trades about 0.35 of its potential returns per unit of risk. Metals X Limited is currently generating about -0.09 per unit of risk. If you would invest  4,133  in Bank of America on September 3, 2024 and sell it today you would earn a total of  618.00  from holding Bank of America or generate 14.95% return on investment over 90 days.

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

Bank of America  vs.  Metals X Limited

Bank of America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Metals X Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Metals X Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Metals X reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Metals X

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

The idea behind Bank of America and Metals X Limited 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.