Correlation Between Bank of America Corp and CeoTronics

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

Diversification Opportunities for Bank of America Corp and CeoTronics

-0.33

Correlation Coefficient

Bank of America Corp  CeoTronics

Very good diversification

The 3 months correlation between Bank and CeoTronics is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and CeoTronics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CeoTronics AG and Bank of America Corp 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 CeoTronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CeoTronics AG has no effect on the direction of Bank of America Corp i.e., Bank of America Corp and CeoTronics go up and down completely randomly.

Pair Corralation between Bank of America Corp and CeoTronics

Assuming the 90 days trading horizon Bank of America is expected to under-perform the CeoTronics. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.25 times less risky than CeoTronics. The stock trades about -0.08 of its potential returns per unit of risk. The CeoTronics AG is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  685.00  in CeoTronics AG on December 5, 2024 and sell it today you would earn a total of  30.00  from holding CeoTronics AG or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Bank of America  vs.  CeoTronics AG

Bank of America Corp

Risk-Adjusted Performance

Very Weak

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 latest fragile performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

CeoTronics AG

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CeoTronics AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable forward-looking signals, CeoTronics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America Corp and CeoTronics

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

The idea behind Bank of America and CeoTronics AG 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.