Correlation Between Bank of America and Pentagon I

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

Diversification Opportunities for Bank of America and Pentagon I

0.05

Correlation Coefficient

Bank of America  Pentagon I

Significant diversification

The 3 months correlation between Bank and Pentagon is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Pentagon I Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pentagon I Capital 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 Pentagon I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pentagon I Capital has no effect on the direction of Bank of America i.e., Bank of America and Pentagon I go up and down completely randomly.

Pair Corralation between Bank of America and Pentagon I

Assuming the 90 days trading horizon Bank of America is expected to generate 1.87 times less return on investment than Pentagon I. But when comparing it to its historical volatility, Bank of America is 5.13 times less risky than Pentagon I. It trades about 0.05 of its potential returns per unit of risk. Pentagon I Capital is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5.00  in Pentagon I Capital on December 11, 2024 and sell it today you would lose (2.00) from holding Pentagon I Capital or give up 40.0% of portfolio value over 90 days.

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

Bank of America  vs.  Pentagon I Capital

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 abnormal performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pentagon I Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pentagon I Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank of America and Pentagon I

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

The idea behind Bank of America and Pentagon I Capital 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..