Correlation Between Applied Materials and Bank of America
Can any of the company-specific risk be diversified away by investing in both Applied Materials 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 Applied Materials 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 Applied Materials and Bank of America, you can compare the effects of market volatilities on Applied Materials 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 Applied Materials with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Bank of America.
Diversification Opportunities for Applied Materials and Bank of America
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Applied and Bank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials 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 Applied Materials 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 Applied Materials 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 Applied Materials i.e., Applied Materials and Bank of America go up and down completely randomly.
Pair Corralation between Applied Materials and Bank of America
Assuming the 90 days trading horizon Applied Materials is expected to generate 1.18 times less return on investment than Bank of America. In addition to that, Applied Materials is 1.57 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 0.09 per unit of volatility. If you would invest 51,831 in Bank of America on December 1, 2024 and sell it today you would earn a total of 42,969 from holding Bank of America or generate 82.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Bank of America
Performance |
| Timeline |
| Applied Materials |
| Bank of America |
Applied Materials and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Bank of America
The main advantage of trading using opposite Applied Materials and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials 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.| Applied Materials vs. Southwest Airlines | Applied Materials vs. Ross Stores | Applied Materials vs. McEwen Mining | Applied Materials vs. Costco Wholesale |
| Bank of America vs. Monster Beverage Corp | Bank of America vs. Martin Marietta Materials | Bank of America vs. The Home Depot | Bank of America vs. Lloyds Banking Group |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| CEOs Directory Screen CEOs from public companies around the world |