Correlation Between Bank of America and PT Bayan
Can any of the company-specific risk be diversified away by investing in both Bank of America and PT Bayan 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 PT Bayan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and PT Bayan Resources, you can compare the effects of market volatilities on Bank of America and PT Bayan 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 PT Bayan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and PT Bayan.
Diversification Opportunities for Bank of America and PT Bayan
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and BNB is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and PT Bayan Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Bayan 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 Verizon Communications are associated (or correlated) with PT Bayan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Bayan Resources has no effect on the direction of Bank of America i.e., Bank of America and PT Bayan go up and down completely randomly.
Pair Corralation between Bank of America and PT Bayan
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.48 times more return on investment than PT Bayan. However, Verizon Communications is 2.1 times less risky than PT Bayan. It trades about 0.05 of its potential returns per unit of risk. PT Bayan Resources is currently generating about 0.02 per unit of risk. If you would invest 3,073 in Verizon Communications on September 12, 2024 and sell it today you would earn a total of 943.00 from holding Verizon Communications or generate 30.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. PT Bayan Resources
Performance |
| Timeline |
| Verizon Communications |
| PT Bayan Resources |
Bank of America and PT Bayan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and PT Bayan
The main advantage of trading using opposite Bank of America and PT Bayan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, PT Bayan 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 PT Bayan will offset losses from the drop in PT Bayan'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 |
| PT Bayan vs. Verizon Communications | PT Bayan vs. American Airlines Group | PT Bayan vs. SINGAPORE AIRLINES | PT Bayan vs. Gol Intelligent Airlines |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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