Correlation Between Xtract One and Bank of AmericaCDR

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

Diversification Opportunities for Xtract One and Bank of AmericaCDR

0.64

Correlation Coefficient

Xtract One  Bank of AmericaCDR

Poor diversification

The 3 months correlation between Xtract and Bank is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Xtract One Technologies 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 Xtract One 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 Xtract One Technologies 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 Xtract One i.e., Xtract One and Bank of AmericaCDR go up and down completely randomly.

Pair Corralation between Xtract One and Bank of AmericaCDR

Assuming the 90 days trading horizon Xtract One Technologies is expected to generate 2.42 times more return on investment than Bank of AmericaCDR. However, Xtract One is 2.42 times more volatile than Bank of America. It trades about 0.02 of its potential returns per unit of risk. Bank of America is currently generating about -0.02 per unit of risk. If you would invest  42.00  in Xtract One Technologies on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Xtract One Technologies or generate 0.0% return on investment over 90 days.

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

Xtract One Technologies  vs.  Bank of America

Xtract One Technologies

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xtract One Technologies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Xtract One is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the 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 Xtract One and Bank of AmericaCDR

The main advantage of trading using opposite Xtract One and Bank of AmericaCDR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtract One 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 Xtract One 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.