Correlation Between Data#3 and Bank of America

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Can any of the company-specific risk be diversified away by investing in both Data#3 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 Data#3 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 Data3 Limited and Bank of America, you can compare the effects of market volatilities on Data#3 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 Data#3 with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Data#3 and Bank of America.

Diversification Opportunities for Data#3 and Bank of America

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Data#3 and Bank is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Data3 Limited and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Data#3 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 Data3 Limited 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 Bank of America has no effect on the direction of Data#3 i.e., Data#3 and Bank of America go up and down completely randomly.

Pair Corralation between Data#3 and Bank of America

Assuming the 90 days horizon Data#3 is expected to generate 2.11 times less return on investment than Bank of America. But when comparing it to its historical volatility, Data3 Limited is 2.54 times less risky than Bank of America. It trades about 0.1 of its potential returns per unit of risk. Bank of America is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,709  in Bank of America on September 5, 2024 and sell it today you would earn a total of  569.00  from holding Bank of America or generate 33.29% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Data3 Limited  vs.  Bank of America

 Performance 
       Timeline  
Data3 Limited 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Data3 Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Data#3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Bank of America 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential 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.

Data#3 and Bank of America Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Data#3 and Bank of America

The main advantage of trading using opposite Data#3 and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Data#3 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 Data3 Limited and Bank of America 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.
Check out your portfolio center.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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