Correlation Between Bank of America and Formycon
Can any of the company-specific risk be diversified away by investing in both Bank of America and Formycon 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 Formycon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Formycon AG, you can compare the effects of market volatilities on Bank of America and Formycon 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 Formycon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Formycon.
Diversification Opportunities for Bank of America and Formycon
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Formycon is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Formycon AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Formycon AG 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 Formycon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Formycon AG has no effect on the direction of Bank of America i.e., Bank of America and Formycon go up and down completely randomly.
Pair Corralation between Bank of America and Formycon
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.5 times more return on investment than Formycon. However, Verizon Communications is 1.99 times less risky than Formycon. It trades about 0.18 of its potential returns per unit of risk. Formycon AG is currently generating about -0.16 per unit of risk. If you would invest 3,678 in Verizon Communications on November 9, 2024 and sell it today you would earn a total of 157.00 from holding Verizon Communications or generate 4.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Formycon AG
Performance |
| Timeline |
| Verizon Communications |
| Formycon AG |
Bank of America and Formycon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Formycon
The main advantage of trading using opposite Bank of America and Formycon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Formycon 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 Formycon will offset losses from the drop in Formycon's long position.| Bank of America vs. Easy Software AG | Bank of America vs. Kingdee International Software | Bank of America vs. SOFI TECHNOLOGIES | Bank of America vs. FARO Technologies |
| Formycon vs. KINGBOARD CHEMICAL | Formycon vs. RYU Apparel | Formycon vs. Comba Telecom Systems | Formycon vs. Highlight Communications AG |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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