Correlation Between Equity Commonwealth and Bank of AmericaPFD SER B

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

By analyzing existing cross correlation between Equity Commonwealth and Bank of America, you can compare the effects of market volatilities on Equity Commonwealth and Bank of AmericaPFD SER B 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 Equity Commonwealth with a short position of Bank of AmericaPFD SER B . Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Commonwealth and Bank of AmericaPFD SER B .

Diversification Opportunities for Equity Commonwealth and Bank of AmericaPFD SER B

-0.46

Correlation Coefficient

Equity Commonwealth  Bank of AmericaPFD SER B

Very good diversification

The 3 months correlation between Equity and Bank is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Equity Commonwealth and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of AmericaPFD SER B and Equity Commonwealth 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 Equity Commonwealth are associated (or correlated) with Bank of AmericaPFD SER B . 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 AmericaPFD SER B has no effect on the direction of Equity Commonwealth i.e., Equity Commonwealth and Bank of AmericaPFD SER B go up and down completely randomly.

Pair Corralation between Equity Commonwealth and Bank of AmericaPFD SER B

Considering the 90-day investment horizon Equity Commonwealth is expected to under-perform the Bank of AmericaPFD SER B . But the stock apears to be less risky and, when comparing its historical volatility, Equity Commonwealth is 7.57 times less risky than Bank of AmericaPFD SER B . The stock trades about -0.08 of its potential returns per unit of risk. The Bank of America is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  21,349  in Bank of America on October 23, 2024 and sell it today you would earn a total of  3,651  from holding Bank of America or generate 17.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.0%
Values	Daily Returns

Equity Commonwealth  vs.  Bank of America

Equity Commonwealth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equity Commonwealth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bank of AmericaPFD SER B

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of AmericaPFD SER B reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equity Commonwealth and Bank of AmericaPFD SER B

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

The idea behind Equity Commonwealth 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.

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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.