Correlation Between Bank of America and ON SEMICONDUCTOR
Can any of the company-specific risk be diversified away by investing in both Bank of America and ON SEMICONDUCTOR 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 Bank of America and ON SEMICONDUCTOR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and ON SEMICONDUCTOR, you can compare the effects of market volatilities on Bank of America and ON SEMICONDUCTOR 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 Bank of America with a short position of ON SEMICONDUCTOR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and ON SEMICONDUCTOR.
Diversification Opportunities for Bank of America and ON SEMICONDUCTOR
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and XS4 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ON SEMICONDUCTOR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ON SEMICONDUCTOR and Bank of America 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 Bank of America are associated (or correlated) with ON SEMICONDUCTOR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ON SEMICONDUCTOR has no effect on the direction of Bank of America i.e., Bank of America and ON SEMICONDUCTOR go up and down completely randomly.
Pair Corralation between Bank of America and ON SEMICONDUCTOR
Assuming the 90 days horizon Bank of America is expected to generate 0.45 times more return on investment than ON SEMICONDUCTOR. However, Bank of America is 2.23 times less risky than ON SEMICONDUCTOR. It trades about -0.02 of its potential returns per unit of risk. ON SEMICONDUCTOR is currently generating about -0.24 per unit of risk. If you would invest 4,365 in Bank of America on December 4, 2024 and sell it today you would lose (97.00) from holding Bank of America or give up 2.22% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of America vs. ON SEMICONDUCTOR
Performance |
Timeline |
Bank of America |
ON SEMICONDUCTOR |
Bank of America and ON SEMICONDUCTOR Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and ON SEMICONDUCTOR
The main advantage of trading using opposite Bank of America and ON SEMICONDUCTOR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, ON SEMICONDUCTOR 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 ON SEMICONDUCTOR will offset losses from the drop in ON SEMICONDUCTOR's long position.Bank of America vs. Southwest Airlines Co | Bank of America vs. JAPAN AIRLINES | Bank of America vs. Samsung Electronics Co | Bank of America vs. UMC Electronics Co |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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