Correlation Between Bank of America and CAL MAINE
Can any of the company-specific risk be diversified away by investing in both Bank of America and CAL MAINE 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 CAL MAINE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and CAL MAINE FOODS, you can compare the effects of market volatilities on Bank of America and CAL MAINE 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 CAL MAINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and CAL MAINE.
Diversification Opportunities for Bank of America and CAL MAINE
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and CAL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and CAL MAINE FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAL MAINE FOODS 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 CAL MAINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAL MAINE FOODS has no effect on the direction of Bank of America i.e., Bank of America and CAL MAINE go up and down completely randomly.
Pair Corralation between Bank of America and CAL MAINE
Assuming the 90 days trading horizon Bank of America is expected to generate 3.31 times less return on investment than CAL MAINE. But when comparing it to its historical volatility, Verizon Communications is 1.41 times less risky than CAL MAINE. It trades about 0.04 of its potential returns per unit of risk. CAL MAINE FOODS is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,240 in CAL MAINE FOODS on September 3, 2024 and sell it today you would earn a total of 4,900 from holding CAL MAINE FOODS or generate 115.57% 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. CAL MAINE FOODS
Performance |
| Timeline |
| Verizon Communications |
| CAL MAINE FOODS |
Bank of America and CAL MAINE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and CAL MAINE
The main advantage of trading using opposite Bank of America and CAL MAINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, CAL MAINE 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 CAL MAINE will offset losses from the drop in CAL MAINE's long position.| Bank of America vs. CAL MAINE FOODS | Bank of America vs. GEELY AUTOMOBILE | Bank of America vs. Nomad Foods | Bank of America vs. NISSIN FOODS HLDGS |
| CAL MAINE vs. LG Display Co | CAL MAINE vs. USWE SPORTS AB | CAL MAINE vs. SINGAPORE AIRLINES | CAL MAINE vs. VIAPLAY GROUP 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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