Correlation Between AIR PRODCHEMICALS and Bank of America
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS and Verizon Communications, you can compare the effects of market volatilities on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and Bank of America.
Diversification Opportunities for AIR PRODCHEMICALS and Bank of America
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and Bank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Bank of America go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and Bank of America
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 1.06 times more return on investment than Bank of America. However, AIR PRODCHEMICALS is 1.06 times more volatile than Verizon Communications. It trades about 0.64 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.08 per unit of risk. If you would invest 27,590 in AIR PRODCHEMICALS on November 7, 2024 and sell it today you would earn a total of 5,150 from holding AIR PRODCHEMICALS or generate 18.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. Verizon Communications
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| Verizon Communications |
AIR PRODCHEMICALS and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and Bank of America
The main advantage of trading using opposite AIR PRODCHEMICALS and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS 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.| AIR PRODCHEMICALS vs. Zoom Video Communications | AIR PRODCHEMICALS vs. Coffee Holding Co | AIR PRODCHEMICALS vs. Chengdu PUTIAN Telecommunications | AIR PRODCHEMICALS vs. Scandinavian Tobacco Group |
| Bank of America vs. ON SEMICONDUCTOR | Bank of America vs. KENEDIX OFFICE INV | Bank of America vs. PLAYMATES TOYS | Bank of America vs. CENTURIA OFFICE REIT |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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