Correlation Between Bank of America and Sable Offshore

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

Diversification Opportunities for Bank of America and Sable Offshore

-0.02

Correlation Coefficient

Bank of America  Sable Offshore

Good diversification

The 3 months correlation between Bank and Sable is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Sable Offshore Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sable Offshore Corp 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 Sable Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sable Offshore Corp has no effect on the direction of Bank of America i.e., Bank of America and Sable Offshore go up and down completely randomly.

Pair Corralation between Bank of America and Sable Offshore

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Sable Offshore. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bank of America is 9.99 times less risky than Sable Offshore. The preferred stock trades about -0.24 of its potential returns per unit of risk. The Sable Offshore Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,124  in Sable Offshore Corp on October 4, 2024 and sell it today you would earn a total of  166.00  from holding Sable Offshore Corp or generate 7.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Bank of America  vs.  Sable Offshore Corp

Bank of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Bank of America is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sable Offshore is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of America and Sable Offshore

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

The idea behind Bank of America and Sable Offshore Corp 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.