Correlation Between Bank of America and FUJITSU
Can any of the company-specific risk be diversified away by investing in both Bank of America and FUJITSU 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 FUJITSU into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and FUJITSU LTD ADR, you can compare the effects of market volatilities on Bank of America and FUJITSU 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 FUJITSU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and FUJITSU.
Diversification Opportunities for Bank of America and FUJITSU
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and FUJITSU is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and FUJITSU LTD ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FUJITSU LTD ADR 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 FUJITSU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FUJITSU LTD ADR has no effect on the direction of Bank of America i.e., Bank of America and FUJITSU go up and down completely randomly.
Pair Corralation between Bank of America and FUJITSU
Assuming the 90 days trading horizon Bank of America is expected to generate 1.51 times less return on investment than FUJITSU. But when comparing it to its historical volatility, Verizon Communications is 1.68 times less risky than FUJITSU. It trades about 0.07 of its potential returns per unit of risk. FUJITSU LTD ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,302 in FUJITSU LTD ADR on September 2, 2024 and sell it today you would earn a total of 478.00 from holding FUJITSU LTD ADR or generate 36.71% 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. FUJITSU LTD ADR
Performance |
| Timeline |
| Verizon Communications |
| FUJITSU LTD ADR |
Bank of America and FUJITSU Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and FUJITSU
The main advantage of trading using opposite Bank of America and FUJITSU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, FUJITSU 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 FUJITSU will offset losses from the drop in FUJITSU'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 |
| FUJITSU vs. Verizon Communications | FUJITSU vs. Gamma Communications plc | FUJITSU vs. Charter Communications | FUJITSU vs. Entravision Communications |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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