Correlation Between Bank of America and Suntory Beverage
Can any of the company-specific risk be diversified away by investing in both Bank of America and Suntory Beverage 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 Suntory Beverage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Suntory Beverage Food, you can compare the effects of market volatilities on Bank of America and Suntory Beverage 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 Suntory Beverage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Suntory Beverage.
Diversification Opportunities for Bank of America and Suntory Beverage
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Suntory is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Suntory Beverage Food in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suntory Beverage Food 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 Verizon Communications are associated (or correlated) with Suntory Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suntory Beverage Food has no effect on the direction of Bank of America i.e., Bank of America and Suntory Beverage go up and down completely randomly.
Pair Corralation between Bank of America and Suntory Beverage
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.91 times more return on investment than Suntory Beverage. However, Verizon Communications is 1.1 times less risky than Suntory Beverage. It trades about 0.31 of its potential returns per unit of risk. Suntory Beverage Food is currently generating about -0.05 per unit of risk. If you would invest 3,860 in Verizon Communications on November 27, 2024 and sell it today you would earn a total of 260.00 from holding Verizon Communications or generate 6.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Suntory Beverage Food
Performance |
| Timeline |
| Verizon Communications |
| Suntory Beverage Food |
Bank of America and Suntory Beverage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Suntory Beverage
The main advantage of trading using opposite Bank of America and Suntory Beverage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Suntory Beverage 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 Suntory Beverage will offset losses from the drop in Suntory Beverage's long position.| Bank of America vs. Collins Foods Limited | Bank of America vs. Perdoceo Education | Bank of America vs. China Modern Dairy | Bank of America vs. Waste Management |
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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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