Correlation Between Bank of America Corp and ASPEN TECHINC

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

Diversification Opportunities for Bank of America Corp and ASPEN TECHINC

0.91

Correlation Coefficient

Bank of America Corp  ASPEN TECHINC

Almost no diversification

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

Pair Corralation between Bank of America Corp and ASPEN TECHINC

Assuming the 90 days trading horizon Bank of America is expected to generate 1.85 times more return on investment than ASPEN TECHINC. However, Bank of America Corp is 1.85 times more volatile than ASPEN TECHINC DL. It trades about 0.1 of its potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.07 per unit of risk. If you would invest  4,385  in Bank of America on October 11, 2024 and sell it today you would earn a total of  94.00  from holding Bank of America or generate 2.14% 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.  ASPEN TECHINC DL

Bank of America Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Bank of America Corp unveiled solid returns over the last few months and may actually be approaching a breakup point.

ASPEN TECHINC DL

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America Corp and ASPEN TECHINC

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

The idea behind Bank of America and ASPEN TECHINC DL 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.