Correlation Between Stampede Drilling and Bank of AmericaCDR

Can any of the company-specific risk be diversified away by investing in both Stampede Drilling and Bank of AmericaCDR 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 Stampede Drilling and Bank of AmericaCDR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stampede Drilling and Bank of America, you can compare the effects of market volatilities on Stampede Drilling and Bank of AmericaCDR 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 Stampede Drilling with a short position of Bank of AmericaCDR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stampede Drilling and Bank of AmericaCDR.

Diversification Opportunities for Stampede Drilling and Bank of AmericaCDR

0.55

Correlation Coefficient

Stampede Drilling  Bank of AmericaCDR

Very weak diversification

The 3 months correlation between Stampede and Bank is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Stampede Drilling and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of AmericaCDR and Stampede Drilling 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 Stampede Drilling are associated (or correlated) with Bank of AmericaCDR. 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 AmericaCDR has no effect on the direction of Stampede Drilling i.e., Stampede Drilling and Bank of AmericaCDR go up and down completely randomly.

Pair Corralation between Stampede Drilling and Bank of AmericaCDR

Assuming the 90 days horizon Stampede Drilling is expected to under-perform the Bank of AmericaCDR. In addition to that, Stampede Drilling is 3.04 times more volatile than Bank of America. It trades about -0.05 of its total potential returns per unit of risk. Bank of America is currently generating about -0.02 per unit of volatility. If you would invest  2,266  in Bank of America on December 22, 2024 and sell it today you would lose (71.00) from holding Bank of America or give up 3.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Stampede Drilling  vs.  Bank of America

Stampede Drilling

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stampede Drilling has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Bank of AmericaCDR

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 rather sound technical and fundamental indicators, Bank of AmericaCDR is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stampede Drilling and Bank of AmericaCDR

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

The idea behind Stampede Drilling 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.