Correlation Between Bank of America and China Communications
Can any of the company-specific risk be diversified away by investing in both Bank of America and China Communications 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 China Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and China Communications Services, you can compare the effects of market volatilities on Bank of America and China Communications 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 China Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and China Communications.
Diversification Opportunities for Bank of America and China Communications
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and China is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and China Communications Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Communications 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 China Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Communications has no effect on the direction of Bank of America i.e., Bank of America and China Communications go up and down completely randomly.
Pair Corralation between Bank of America and China Communications
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.53 times more return on investment than China Communications. However, Verizon Communications is 1.89 times less risky than China Communications. It trades about 0.04 of its potential returns per unit of risk. China Communications Services is currently generating about 0.01 per unit of risk. If you would invest 3,511 in Verizon Communications on January 14, 2025 and sell it today you would earn a total of 342.00 from holding Verizon Communications or generate 9.74% 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. China Communications Services
Performance |
| Timeline |
| Verizon Communications |
| China Communications |
Bank of America and China Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and China Communications
The main advantage of trading using opposite Bank of America and China Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, China Communications 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 China Communications will offset losses from the drop in China Communications' long position.| Bank of America vs. North American Construction | Bank of America vs. GOODYEAR T RUBBER | Bank of America vs. Eagle Materials | Bank of America vs. VULCAN MATERIALS |
| China Communications vs. Peijia Medical Limited | China Communications vs. MGIC INVESTMENT | China Communications vs. China Medical System | China Communications vs. Chuangs China Investments |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |