Correlation Between Bank of America and Techtronic Industries
Can any of the company-specific risk be diversified away by investing in both Bank of America and Techtronic Industries 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 Techtronic Industries 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 Techtronic Industries Ltd, you can compare the effects of market volatilities on Bank of America and Techtronic Industries 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 Techtronic Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Techtronic Industries.
Diversification Opportunities for Bank of America and Techtronic Industries
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Techtronic is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Techtronic Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Techtronic Industries 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 Techtronic Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Techtronic Industries has no effect on the direction of Bank of America i.e., Bank of America and Techtronic Industries go up and down completely randomly.
Pair Corralation between Bank of America and Techtronic Industries
Assuming the 90 days trading horizon Bank of America is expected to generate 3.33 times less return on investment than Techtronic Industries. But when comparing it to its historical volatility, Bank of America is 3.1 times less risky than Techtronic Industries. It trades about 0.03 of its potential returns per unit of risk. Techtronic Industries Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 6,663 in Techtronic Industries Ltd on August 28, 2024 and sell it today you would earn a total of 229.00 from holding Techtronic Industries Ltd or generate 3.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Techtronic Industries Ltd
Performance |
| Timeline |
| Bank of America |
| Techtronic Industries |
Bank of America and Techtronic Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Techtronic Industries
The main advantage of trading using opposite Bank of America and Techtronic Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Techtronic Industries 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 Techtronic Industries will offset losses from the drop in Techtronic Industries' long position.| Bank of America vs. LENSAR Inc | Bank of America vs. Microbot Medical | Bank of America vs. Meiwu Technology Co | Bank of America vs. Merit Medical Systems |
| Techtronic Industries vs. SMC Corp Japan | Techtronic Industries vs. Hong Kong Exchange | Techtronic Industries vs. AIA Group Ltd | Techtronic Industries vs. Techtronic Industries |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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