Correlation Between Bank of America and Quisitive Technology

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

Diversification Opportunities for Bank of America and Quisitive Technology

0.16

Correlation Coefficient

Bank of America  Quisitive Technology

Average diversification

The 3 months correlation between Bank and Quisitive is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Quisitive Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quisitive Technology 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 Quisitive Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quisitive Technology has no effect on the direction of Bank of America i.e., Bank of America and Quisitive Technology go up and down completely randomly.

Pair Corralation between Bank of America and Quisitive Technology

Considering the 90-day investment horizon Bank of America is expected to generate 1.04 times more return on investment than Quisitive Technology. However, Bank of America is 1.04 times more volatile than Quisitive Technology Solutions. It trades about 0.08 of its potential returns per unit of risk. Quisitive Technology Solutions is currently generating about 0.01 per unit of risk. If you would invest  4,429  in Bank of America on December 3, 2024 and sell it today you would earn a total of  181.00  from holding Bank of America or generate 4.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Bank of America  vs.  Quisitive Technology Solutions

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.

Quisitive Technology

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quisitive Technology Solutions are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Quisitive Technology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Quisitive Technology

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

The idea behind Bank of America and Quisitive Technology Solutions 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.