Correlation Between Precious Metals and Bank of America

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

Diversification Opportunities for Precious Metals and Bank of America

-0.24

Correlation Coefficient

Precious Metals  Bank of America

Very good diversification

The 3 months correlation between Precious and Bank is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Precious Metals And 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 Precious Metals 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 Precious Metals And 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 Precious Metals i.e., Precious Metals and Bank of America go up and down completely randomly.

Pair Corralation between Precious Metals and Bank of America

Assuming the 90 days trading horizon Precious Metals is expected to generate 4.27 times less return on investment than Bank of America. In addition to that, Precious Metals is 1.23 times more volatile than Bank of America. It trades about 0.01 of its total potential returns per unit of risk. Bank of America is currently generating about 0.05 per unit of volatility. If you would invest  1,752  in Bank of America on October 15, 2024 and sell it today you would earn a total of  595.00  from holding Bank of America or generate 33.96% return on investment over 90 days.

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

Precious Metals And  vs.  Bank of America

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Precious Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Bank of America

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. In spite of rather abnormal technical and fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Precious Metals and Bank of America

The main advantage of trading using opposite Precious Metals and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Precious Metals 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 Precious Metals And 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.