Correlation Between CITY OFFICE and Bank of America
Can any of the company-specific risk be diversified away by investing in both CITY OFFICE 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 CITY OFFICE 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 CITY OFFICE REIT and Verizon Communications, you can compare the effects of market volatilities on CITY OFFICE 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 CITY OFFICE with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of CITY OFFICE and Bank of America.
Diversification Opportunities for CITY OFFICE and Bank of America
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between CITY and Bank is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and CITY OFFICE 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 CITY OFFICE REIT 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 CITY OFFICE i.e., CITY OFFICE and Bank of America go up and down completely randomly.
Pair Corralation between CITY OFFICE and Bank of America
Assuming the 90 days horizon CITY OFFICE REIT is expected to under-perform the Bank of America. In addition to that, CITY OFFICE is 2.64 times more volatile than Verizon Communications. It trades about -0.09 of its total potential returns per unit of risk. Verizon Communications is currently generating about -0.03 per unit of volatility. If you would invest 3,852 in Verizon Communications on November 3, 2024 and sell it today you would lose (40.00) from holding Verizon Communications or give up 1.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CITY OFFICE REIT vs. Verizon Communications
Performance |
| Timeline |
| CITY OFFICE REIT |
| Verizon Communications |
CITY OFFICE and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CITY OFFICE and Bank of America
The main advantage of trading using opposite CITY OFFICE and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE 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.| CITY OFFICE vs. Boston Properties | CITY OFFICE vs. Great Portland Estates | CITY OFFICE vs. Easterly Government Properties | CITY OFFICE vs. Office Properties Income |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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