Correlation Between Carmat SA and Bank of America

Can any of the company-specific risk be diversified away by investing in both Carmat SA 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 Carmat SA 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 Carmat SA and Verizon Communications, you can compare the effects of market volatilities on Carmat SA 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 Carmat SA with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carmat SA and Bank of America.

Diversification Opportunities for Carmat SA and Bank of America

-0.54

Correlation Coefficient

Carmat SA  Bank of America

Excellent diversification

The 3 months correlation between Carmat and Bank is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Carmat SA and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Carmat SA 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 Carmat SA 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 Carmat SA i.e., Carmat SA and Bank of America go up and down completely randomly.

Pair Corralation between Carmat SA and Bank of America

Assuming the 90 days horizon Carmat SA is expected to under-perform the Bank of America. In addition to that, Carmat SA is 2.55 times more volatile than Verizon Communications. It trades about -0.02 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.08 per unit of volatility. If you would invest  3,753  in Verizon Communications on December 28, 2024 and sell it today you would earn a total of  319.00  from holding Verizon Communications or generate 8.5% return on investment over 90 days.

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

Carmat SA  vs.  Verizon Communications

Carmat SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carmat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Verizon Communications

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Carmat SA and Bank of America

The main advantage of trading using opposite Carmat SA and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carmat SA 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 Carmat SA 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 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.