Correlation Between Bank of America and Citic Telecom
Can any of the company-specific risk be diversified away by investing in both Bank of America and Citic Telecom 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 Citic Telecom into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Citic Telecom International, you can compare the effects of market volatilities on Bank of America and Citic Telecom 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 Citic Telecom. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Citic Telecom.
Diversification Opportunities for Bank of America and Citic Telecom
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Citic is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Citic Telecom International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Telecom Intern 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 Citic Telecom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Telecom Intern has no effect on the direction of Bank of America i.e., Bank of America and Citic Telecom go up and down completely randomly.
Pair Corralation between Bank of America and Citic Telecom
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.59 times more return on investment than Citic Telecom. However, Verizon Communications is 1.69 times less risky than Citic Telecom. It trades about 0.34 of its potential returns per unit of risk. Citic Telecom International is currently generating about 0.09 per unit of risk. If you would invest 3,821 in Verizon Communications on August 30, 2024 and sell it today you would earn a total of 394.00 from holding Verizon Communications or generate 10.31% 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. Citic Telecom International
Performance |
| Timeline |
| Verizon Communications |
| Citic Telecom Intern |
Bank of America and Citic Telecom Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Citic Telecom
The main advantage of trading using opposite Bank of America and Citic Telecom positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Citic Telecom 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 Citic Telecom will offset losses from the drop in Citic Telecom's long position.| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Superior Plus Corp | Bank of America vs. SIVERS SEMICONDUCTORS AB |
| Citic Telecom vs. AUSTEVOLL SEAFOOD | Citic Telecom vs. CVW CLEANTECH INC | Citic Telecom vs. Performance Food Group | Citic Telecom vs. CAREER EDUCATION |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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