Correlation Between Nexa Resources and Bank of America

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

Diversification Opportunities for Nexa Resources and Bank of America

-0.74

Correlation Coefficient

Nexa Resources  Bank of America

Pay attention - limited upside

The 3 months correlation between Nexa and Bank is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nexa Resources Peru 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 Nexa Resources 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 Nexa Resources Peru 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 Nexa Resources i.e., Nexa Resources and Bank of America go up and down completely randomly.

Pair Corralation between Nexa Resources and Bank of America

Assuming the 90 days trading horizon Nexa Resources Peru is expected to under-perform the Bank of America. In addition to that, Nexa Resources is 1.09 times more volatile than Bank of America. It trades about -0.23 of its total potential returns per unit of risk. Bank of America is currently generating about 0.03 per unit of volatility. If you would invest  4,581  in Bank of America on October 11, 2024 and sell it today you would earn a total of  19.00  from holding Bank of America or generate 0.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	81.82%
Values	Daily Returns

Nexa Resources Peru  vs.  Bank of America

Nexa Resources Peru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nexa Resources Peru has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bank of America

Risk-Adjusted Performance

0 of 100

Good

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 very inconsistent primary indicators, Bank of America displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nexa Resources and Bank of America

The main advantage of trading using opposite Nexa Resources and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nexa Resources 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 Nexa Resources Peru 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.