Correlation Between SentinelOne and Bank of America

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

Diversification Opportunities for SentinelOne and Bank of America

-0.51

Correlation Coefficient

SentinelOne  Bank of America

Excellent diversification

The 3 months correlation between SentinelOne and Bank is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding SentinelOne and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and SentinelOne 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 SentinelOne 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 Verizon Communications has no effect on the direction of SentinelOne i.e., SentinelOne and Bank of America go up and down completely randomly.

Pair Corralation between SentinelOne and Bank of America

Taking into account the 90-day investment horizon SentinelOne is expected to under-perform the Bank of America. In addition to that, SentinelOne is 1.3 times more volatile than Verizon Communications. It trades about -0.11 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.1 per unit of volatility. If you would invest  3,740  in Verizon Communications on December 29, 2024 and sell it today you would earn a total of  410.00  from holding Verizon Communications or generate 10.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

SentinelOne  vs.  Verizon Communications

SentinelOne

Risk-Adjusted Performance

Very Weak

Over the last 90 days SentinelOne has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Verizon Communications

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SentinelOne and Bank of America

The main advantage of trading using opposite SentinelOne and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SentinelOne 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 SentinelOne and Verizon Communications 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.