Correlation Between Computer and Bank of America

Can any of the company-specific risk be diversified away by investing in both Computer and Bank of America 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 Computer and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Computer And Technologies and Verizon Communications, you can compare the effects of market volatilities on Computer and Bank of America 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 Computer with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Computer and Bank of America.

Diversification Opportunities for Computer and Bank of America

-0.36

Correlation Coefficient

Computer  Bank of America

Very good diversification

The 3 months correlation between Computer and Bank is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Computer And Technologies and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Computer 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 Computer And Technologies are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Computer i.e., Computer and Bank of America go up and down completely randomly.

Pair Corralation between Computer and Bank of America

Assuming the 90 days horizon Computer And Technologies is expected to under-perform the Bank of America. In addition to that, Computer is 1.69 times more volatile than Verizon Communications. It trades about -0.1 of its total potential returns per unit of risk. Verizon Communications is currently generating about -0.01 per unit of volatility. If you would invest  3,912  in Verizon Communications on September 23, 2024 and sell it today you would lose (53.00) from holding Verizon Communications or give up 1.35% of portfolio value over 90 days.

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

Computer And Technologies  vs.  Verizon Communications

Computer And Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Computer And Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Verizon Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verizon Communications has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Bank of America 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 Computer and Bank of America

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

The idea behind Computer And Technologies and Verizon Communications 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.