Correlation Between Palantir Technologies and Bank of America

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

Diversification Opportunities for Palantir Technologies and Bank of America

0.91

Correlation Coefficient

Palantir Technologies  Bank of America

Almost no diversification

The 3 months correlation between Palantir and Bank is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies 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 Palantir Technologies i.e., Palantir Technologies and Bank of America go up and down completely randomly.

Pair Corralation between Palantir Technologies and Bank of America

Assuming the 90 days trading horizon Palantir Technologies is expected to generate 2.55 times more return on investment than Bank of America. However, Palantir Technologies is 2.55 times more volatile than Bank of America. It trades about 0.14 of its potential returns per unit of risk. Bank of America is currently generating about 0.12 per unit of risk. If you would invest  2,535  in Palantir Technologies on October 3, 2024 and sell it today you would earn a total of  13,512  from holding Palantir Technologies or generate 533.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.75%
Values	Daily Returns

Palantir Technologies  vs.  Bank of America

Palantir Technologies

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Palantir Technologies are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Palantir Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Bank of America

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank of America sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Palantir Technologies and Bank of America

The main advantage of trading using opposite Palantir Technologies and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palantir Technologies 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 Palantir Technologies 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.