Correlation Between Bank of America and PLAYTIKA HOLDING

Can any of the company-specific risk be diversified away by investing in both Bank of America and PLAYTIKA HOLDING 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 PLAYTIKA HOLDING 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 PLAYTIKA HOLDING DL 01, you can compare the effects of market volatilities on Bank of America and PLAYTIKA HOLDING 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 PLAYTIKA HOLDING. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and PLAYTIKA HOLDING.

Diversification Opportunities for Bank of America and PLAYTIKA HOLDING

0.91

Correlation Coefficient

Bank of America  PLAYTIKA HOLDING

Almost no diversification

The 3 months correlation between Bank and PLAYTIKA is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and PLAYTIKA HOLDING DL 01 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLAYTIKA HOLDING 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 PLAYTIKA HOLDING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLAYTIKA HOLDING has no effect on the direction of Bank of America i.e., Bank of America and PLAYTIKA HOLDING go up and down completely randomly.

Pair Corralation between Bank of America and PLAYTIKA HOLDING

Assuming the 90 days trading horizon Bank of America is expected to generate 0.8 times more return on investment than PLAYTIKA HOLDING. However, Bank of America is 1.25 times less risky than PLAYTIKA HOLDING. It trades about 0.21 of its potential returns per unit of risk. PLAYTIKA HOLDING DL 01 is currently generating about 0.15 per unit of risk. If you would invest  3,472  in Bank of America on September 16, 2024 and sell it today you would earn a total of  881.00  from holding Bank of America or generate 25.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  PLAYTIKA HOLDING DL 01

Bank of America

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Bank of America unveiled solid returns over the last few months and may actually be approaching a breakup point.

PLAYTIKA HOLDING

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PLAYTIKA HOLDING DL 01 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, PLAYTIKA HOLDING reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and PLAYTIKA HOLDING

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

The idea behind Bank of America and PLAYTIKA HOLDING DL 01 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.