Correlation Between Bank of America and Cass Information
Can any of the company-specific risk be diversified away by investing in both Bank of America and Cass Information 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 Cass Information into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Cass Information Systems, you can compare the effects of market volatilities on Bank of America and Cass Information 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 Cass Information. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Cass Information.
Diversification Opportunities for Bank of America and Cass Information
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and Cass is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Cass Information Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cass Information Systems 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 Cass Information. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cass Information Systems has no effect on the direction of Bank of America i.e., Bank of America and Cass Information go up and down completely randomly.
Pair Corralation between Bank of America and Cass Information
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.74 times more return on investment than Cass Information. However, Verizon Communications is 1.35 times less risky than Cass Information. It trades about 0.05 of its potential returns per unit of risk. Cass Information Systems is currently generating about 0.02 per unit of risk. If you would invest 3,086 in Verizon Communications on September 2, 2024 and sell it today you would earn a total of 1,089 from holding Verizon Communications or generate 35.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Cass Information Systems
Performance |
| Timeline |
| Verizon Communications |
| Cass Information Systems |
Bank of America and Cass Information Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Cass Information
The main advantage of trading using opposite Bank of America and Cass Information positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Cass Information 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 Cass Information will offset losses from the drop in Cass Information's long position.| Bank of America vs. SIVERS SEMICONDUCTORS AB | Bank of America vs. Darden Restaurants | Bank of America vs. Reliance Steel Aluminum | Bank of America vs. Q2M Managementberatung AG |
| Cass Information vs. Superior Plus Corp | Cass Information vs. NMI Holdings | Cass Information vs. Origin Agritech | Cass Information vs. SIVERS SEMICONDUCTORS AB |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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