Correlation Between Bank of America and Onex Corp

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

Diversification Opportunities for Bank of America and Onex Corp

0.93

Correlation Coefficient

Bank of America  Onex Corp

Almost no diversification

The 3 months correlation between Bank and Onex is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Onex Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Onex 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 Onex Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Onex Corp has no effect on the direction of Bank of America i.e., Bank of America and Onex Corp go up and down completely randomly.

Pair Corralation between Bank of America and Onex Corp

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Onex Corp. In addition to that, Bank of America is 1.14 times more volatile than Onex Corp. It trades about -0.25 of its total potential returns per unit of risk. Onex Corp is currently generating about -0.25 per unit of volatility. If you would invest  11,524  in Onex Corp on September 25, 2024 and sell it today you would lose (597.00) from holding Onex Corp or give up 5.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Bank of America  vs.  Onex Corp

Bank of America

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Onex Corp

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Bank of America and Onex Corp

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

The idea behind Bank of America and Onex 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.