Correlation Between DATAGROUP and Bank of America

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

Diversification Opportunities for DATAGROUP and Bank of America

0.41

Correlation Coefficient

DATAGROUP  Bank of America

Very weak diversification

The 3 months correlation between DATAGROUP and Bank is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and DATAGROUP 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 DATAGROUP SE 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 DATAGROUP i.e., DATAGROUP and Bank of America go up and down completely randomly.

Pair Corralation between DATAGROUP and Bank of America

Assuming the 90 days trading horizon DATAGROUP SE is expected to generate 2.52 times more return on investment than Bank of America. However, DATAGROUP is 2.52 times more volatile than Verizon Communications. It trades about 0.14 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.09 per unit of risk. If you would invest  3,975  in DATAGROUP SE on October 6, 2024 and sell it today you would earn a total of  590.00  from holding DATAGROUP SE or generate 14.84% return on investment over 90 days.

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

DATAGROUP SE  vs.  Verizon Communications

DATAGROUP SE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical indicators, DATAGROUP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. Despite nearly stable basic 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.

Pair Trading with DATAGROUP and Bank of America

The main advantage of trading using opposite DATAGROUP and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATAGROUP 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 DATAGROUP SE 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.