Correlation Between Bank of America and Parex Resources
Can any of the company-specific risk be diversified away by investing in both Bank of America and Parex 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 Parex 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 Parex Resources, you can compare the effects of market volatilities on Bank of America and Parex 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 Parex Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Parex Resources.
Diversification Opportunities for Bank of America and Parex Resources
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Parex is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Parex Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parex Resources 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 Parex Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parex Resources has no effect on the direction of Bank of America i.e., Bank of America and Parex Resources go up and down completely randomly.
Pair Corralation between Bank of America and Parex Resources
Assuming the 90 days trading horizon Bank of America is expected to generate 0.28 times more return on investment than Parex Resources. However, Bank of America is 3.54 times less risky than Parex Resources. It trades about 0.04 of its potential returns per unit of risk. Parex Resources is currently generating about 0.01 per unit of risk. If you would invest 107,814 in Bank of America on August 25, 2024 and sell it today you would earn a total of 16,650 from holding Bank of America or generate 15.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Parex Resources
Performance |
| Timeline |
| Bank of America |
| Parex Resources |
Bank of America and Parex Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Parex Resources
The main advantage of trading using opposite Bank of America and Parex Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Parex 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 Parex Resources will offset losses from the drop in Parex Resources' long position.| Bank of America vs. Bank of America | Bank of America vs. China Construction Bank | Bank of America vs. Wells Fargo | Bank of America vs. Wells Fargo |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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