Correlation Between Bank of America and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both Bank of America and NextSource Materials 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 NextSource Materials 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 NextSource Materials, you can compare the effects of market volatilities on Bank of America and NextSource Materials 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 NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and NextSource Materials.
Diversification Opportunities for Bank of America and NextSource Materials
-0.89 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and NextSource is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials 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 NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Bank of America i.e., Bank of America and NextSource Materials go up and down completely randomly.
Pair Corralation between Bank of America and NextSource Materials
Considering the 90-day investment horizon Bank of America is expected to generate 0.22 times more return on investment than NextSource Materials. However, Bank of America is 4.46 times less risky than NextSource Materials. It trades about 0.26 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.01 per unit of risk. If you would invest 4,452 in Bank of America on September 8, 2024 and sell it today you would earn a total of 223.00 from holding Bank of America or generate 5.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Bank of America vs. NextSource Materials
Performance |
Timeline |
Bank of America |
NextSource Materials |
Bank of America and NextSource Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and NextSource Materials
The main advantage of trading using opposite Bank of America and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.Bank of America vs. Citigroup | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC |
NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Syrah Resources Limited | NextSource Materials vs. Mason Graphite | NextSource Materials vs. Graphite One |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |