Correlation Between Bank of America and Garibaldi Resources
Can any of the company-specific risk be diversified away by investing in both Bank of America and Garibaldi Resources 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 Bank of America and Garibaldi Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Garibaldi Resources Corp, you can compare the effects of market volatilities on Bank of America and Garibaldi Resources 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 Bank of America with a short position of Garibaldi Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Garibaldi Resources.
Diversification Opportunities for Bank of America and Garibaldi Resources
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Garibaldi is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Garibaldi Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Garibaldi Resources Corp and Bank of America 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 Bank of America are associated (or correlated) with Garibaldi Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Garibaldi Resources Corp has no effect on the direction of Bank of America i.e., Bank of America and Garibaldi Resources go up and down completely randomly.
Pair Corralation between Bank of America and Garibaldi Resources
Assuming the 90 days trading horizon Bank of America is expected to generate 69.15 times less return on investment than Garibaldi Resources. But when comparing it to its historical volatility, Bank of America is 40.61 times less risky than Garibaldi Resources. It trades about 0.05 of its potential returns per unit of risk. Garibaldi Resources Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 30.00 in Garibaldi Resources Corp on August 30, 2024 and sell it today you would lose (26.00) from holding Garibaldi Resources Corp or give up 86.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Garibaldi Resources Corp
Performance |
| Timeline |
| Bank of America |
| Garibaldi Resources Corp |
Bank of America and Garibaldi Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Garibaldi Resources
The main advantage of trading using opposite Bank of America and Garibaldi Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Garibaldi Resources 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 Garibaldi Resources will offset losses from the drop in Garibaldi Resources' long position.| Bank of America vs. Citigroup | Bank of America vs. Canadian Imperial Bank | Bank of America vs. Royal Bank of | Bank of America vs. Toronto Dominion Bank |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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