Correlation Between Bank of America and COMBA TELECOM
Can any of the company-specific risk be diversified away by investing in both Bank of America and COMBA TELECOM 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 COMBA TELECOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and COMBA TELECOM SYST, you can compare the effects of market volatilities on Bank of America and COMBA TELECOM 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 COMBA TELECOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and COMBA TELECOM.
Diversification Opportunities for Bank of America and COMBA TELECOM
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and COMBA is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and COMBA TELECOM SYST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COMBA TELECOM SYST 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 COMBA TELECOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COMBA TELECOM SYST has no effect on the direction of Bank of America i.e., Bank of America and COMBA TELECOM go up and down completely randomly.
Pair Corralation between Bank of America and COMBA TELECOM
Assuming the 90 days trading horizon Bank of America is expected to generate 3.44 times less return on investment than COMBA TELECOM. But when comparing it to its historical volatility, Verizon Communications is 1.83 times less risky than COMBA TELECOM. It trades about 0.05 of its potential returns per unit of risk. COMBA TELECOM SYST is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8.00 in COMBA TELECOM SYST on August 28, 2024 and sell it today you would earn a total of 4.00 from holding COMBA TELECOM SYST or generate 50.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. COMBA TELECOM SYST
Performance |
| Timeline |
| Verizon Communications |
| COMBA TELECOM SYST |
Bank of America and COMBA TELECOM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and COMBA TELECOM
The main advantage of trading using opposite Bank of America and COMBA TELECOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, COMBA TELECOM 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 COMBA TELECOM will offset losses from the drop in COMBA TELECOM'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. Microsoft |
| COMBA TELECOM vs. Apple Inc | COMBA TELECOM vs. Apple Inc | COMBA TELECOM vs. Apple Inc | COMBA TELECOM vs. Microsoft |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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