Correlation Between Bank of America and Palisade Bio

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

Diversification Opportunities for Bank of America and Palisade Bio

-0.83

Correlation Coefficient

Bank of America  Palisade Bio

Pay attention - limited upside

The 3 months correlation between Bank and Palisade is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Palisade Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palisade Bio 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 Palisade Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palisade Bio has no effect on the direction of Bank of America i.e., Bank of America and Palisade Bio go up and down completely randomly.

Pair Corralation between Bank of America and Palisade Bio

Considering the 90-day investment horizon Bank of America is expected to generate 0.15 times more return on investment than Palisade Bio. However, Bank of America is 6.63 times less risky than Palisade Bio. It trades about 0.1 of its potential returns per unit of risk. Palisade Bio is currently generating about -0.02 per unit of risk. If you would invest  2,820  in Bank of America on August 31, 2024 and sell it today you would earn a total of  1,931  from holding Bank of America or generate 68.48% return on investment over 90 days.

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

Bank of America  vs.  Palisade Bio

Bank of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Palisade Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palisade Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Bank of America and Palisade Bio

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

The idea behind Bank of America and Palisade Bio 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.