Correlation Between Scotiabank Peru and Bank of America

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

Diversification Opportunities for Scotiabank Peru and Bank of America

-0.64

Correlation Coefficient

Scotiabank Peru  Bank of America

Excellent diversification

The 3 months correlation between Scotiabank and Bank is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Scotiabank Peru SAA 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 Scotiabank Peru 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 Scotiabank Peru SAA 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 Scotiabank Peru i.e., Scotiabank Peru and Bank of America go up and down completely randomly.

Pair Corralation between Scotiabank Peru and Bank of America

Assuming the 90 days trading horizon Scotiabank Peru SAA is expected to generate 1.87 times more return on investment than Bank of America. However, Scotiabank Peru is 1.87 times more volatile than Bank of America. It trades about 0.23 of its potential returns per unit of risk. Bank of America is currently generating about -0.06 per unit of risk. If you would invest  1,030  in Scotiabank Peru SAA on December 25, 2024 and sell it today you would earn a total of  170.00  from holding Scotiabank Peru SAA or generate 16.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	46.15%
Values	Daily Returns

Scotiabank Peru SAA  vs.  Bank of America

Scotiabank Peru SAA

Risk-Adjusted Performance

Solid

Over the last 90 days Scotiabank Peru SAA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather inconsistent basic indicators, Scotiabank Peru exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bank of America

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 weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Scotiabank Peru and Bank of America

The main advantage of trading using opposite Scotiabank Peru and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scotiabank Peru 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 Scotiabank Peru SAA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.