Correlation Between Bank of America and WT OFFSHORE

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

Diversification Opportunities for Bank of America and WT OFFSHORE

0.65

Correlation Coefficient

Bank of America  WT OFFSHORE

Poor diversification

The 3 months correlation between Bank and UWV is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and WT OFFSHORE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT OFFSHORE 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 WT OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT OFFSHORE has no effect on the direction of Bank of America i.e., Bank of America and WT OFFSHORE go up and down completely randomly.

Pair Corralation between Bank of America and WT OFFSHORE

Considering the 90-day investment horizon Bank of America is expected to under-perform the WT OFFSHORE. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 2.29 times less risky than WT OFFSHORE. The stock trades about -0.02 of its potential returns per unit of risk. The WT OFFSHORE is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  154.00  in WT OFFSHORE on December 27, 2024 and sell it today you would lose (3.00) from holding WT OFFSHORE or give up 1.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

Bank of America  vs.  WT OFFSHORE

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.

WT OFFSHORE

Risk-Adjusted Performance

Very Weak

Over the last 90 days WT OFFSHORE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, WT OFFSHORE is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and WT OFFSHORE

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

The idea behind Bank of America and WT OFFSHORE 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.