Correlation Between Data#3 and Bank of America
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 Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.8% |
Values | Daily Returns |
Data3 Limited vs. Bank of America
Performance |
Timeline |
Data3 Limited |
Bank of America |
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.Data#3 vs. United Guardian | Data#3 vs. Shake Shack | Data#3 vs. Torm PLC Class | Data#3 vs. Verra Mobility Corp |
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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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