Correlation Between Pesquera Exalmar and Bank of America

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

Diversification Opportunities for Pesquera Exalmar and Bank of America

0.71

Correlation Coefficient

Pesquera Exalmar  Bank of America

Poor diversification

The 3 months correlation between Pesquera and Bank is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Pesquera Exalmar SAA 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 Pesquera Exalmar 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 Pesquera Exalmar SAA 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 Pesquera Exalmar i.e., Pesquera Exalmar and Bank of America go up and down completely randomly.

Pair Corralation between Pesquera Exalmar and Bank of America

Assuming the 90 days trading horizon Pesquera Exalmar SAA is expected to generate 0.73 times more return on investment than Bank of America. However, Pesquera Exalmar SAA is 1.37 times less risky than Bank of America. It trades about 0.5 of its potential returns per unit of risk. Bank of America is currently generating about 0.03 per unit of risk. If you would invest  250.00  in Pesquera Exalmar SAA on October 11, 2024 and sell it today you would earn a total of  8.00  from holding Pesquera Exalmar SAA or generate 3.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	36.36%
Values	Daily Returns

Pesquera Exalmar SAA  vs.  Bank of America

Pesquera Exalmar SAA

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days Pesquera Exalmar SAA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady primary indicators, Pesquera Exalmar sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank of America

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very inconsistent primary indicators, Bank of America displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pesquera Exalmar and Bank of America

The main advantage of trading using opposite Pesquera Exalmar and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pesquera Exalmar 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 Pesquera Exalmar SAA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.