Correlation Between Bank of America and Bechtle AG
Can any of the company-specific risk be diversified away by investing in both Bank of America and Bechtle AG 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 Bechtle AG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Bechtle AG, you can compare the effects of market volatilities on Bank of America and Bechtle AG 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 Bechtle AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Bechtle AG.
Diversification Opportunities for Bank of America and Bechtle AG
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Bechtle is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Bechtle AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bechtle AG 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 Bechtle AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bechtle AG has no effect on the direction of Bank of America i.e., Bank of America and Bechtle AG go up and down completely randomly.
Pair Corralation between Bank of America and Bechtle AG
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.91 times more return on investment than Bechtle AG. However, Verizon Communications is 1.1 times less risky than Bechtle AG. It trades about 0.21 of its potential returns per unit of risk. Bechtle AG is currently generating about -0.16 per unit of risk. If you would invest 3,809 in Verizon Communications on September 12, 2024 and sell it today you would earn a total of 207.00 from holding Verizon Communications or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Verizon Communications vs. Bechtle AG
Performance |
| Timeline |
| Verizon Communications |
| Bechtle AG |
Bank of America and Bechtle AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Bechtle AG
The main advantage of trading using opposite Bank of America and Bechtle AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Bechtle AG 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 Bechtle AG will offset losses from the drop in Bechtle AG's long position.| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc |
| Bechtle AG vs. GOODYEAR T RUBBER | Bechtle AG vs. Verizon Communications | Bechtle AG vs. SANOK RUBBER ZY | Bechtle AG vs. VULCAN MATERIALS |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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