Correlation Between Postal Savings and Bank of America
Can any of the company-specific risk be diversified away by investing in both Postal Savings 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 Postal Savings 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 Postal Savings Bank and Verizon Communications, you can compare the effects of market volatilities on Postal Savings 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 Postal Savings with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Postal Savings and Bank of America.
Diversification Opportunities for Postal Savings and Bank of America
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Postal and Bank is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Postal Savings Bank and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Postal Savings 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 Postal Savings Bank 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 Postal Savings i.e., Postal Savings and Bank of America go up and down completely randomly.
Pair Corralation between Postal Savings and Bank of America
Assuming the 90 days horizon Postal Savings Bank is expected to generate 6.92 times more return on investment than Bank of America. However, Postal Savings is 6.92 times more volatile than Verizon Communications. It trades about 0.09 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.05 per unit of risk. If you would invest 25.00 in Postal Savings Bank on September 19, 2024 and sell it today you would earn a total of 28.00 from holding Postal Savings Bank or generate 112.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Postal Savings Bank vs. Verizon Communications
Performance |
| Timeline |
| Postal Savings Bank |
| Verizon Communications |
Postal Savings and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Postal Savings and Bank of America
The main advantage of trading using opposite Postal Savings and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Postal Savings 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.| Postal Savings vs. POSBO UNSPADRS20YC1 | Postal Savings vs. UTD OV BK LOC ADR1 | Postal Savings vs. Superior Plus Corp | Postal Savings vs. SIVERS SEMICONDUCTORS AB |
| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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