Correlation Between Bank of America and GungHo Online
Can any of the company-specific risk be diversified away by investing in both Bank of America and GungHo Online 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 GungHo Online into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and GungHo Online Entertainment, you can compare the effects of market volatilities on Bank of America and GungHo Online 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 GungHo Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and GungHo Online.
Diversification Opportunities for Bank of America and GungHo Online
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and GungHo is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and GungHo Online Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GungHo Online Entert 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 GungHo Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GungHo Online Entert has no effect on the direction of Bank of America i.e., Bank of America and GungHo Online go up and down completely randomly.
Pair Corralation between Bank of America and GungHo Online
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.54 times more return on investment than GungHo Online. However, Verizon Communications is 1.84 times less risky than GungHo Online. It trades about 0.33 of its potential returns per unit of risk. GungHo Online Entertainment is currently generating about -0.13 per unit of risk. If you would invest 3,842 in Verizon Communications on August 29, 2024 and sell it today you would earn a total of 381.00 from holding Verizon Communications or generate 9.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Verizon Communications vs. GungHo Online Entertainment
Performance |
| Timeline |
| Verizon Communications |
| GungHo Online Entert |
Bank of America and GungHo Online Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and GungHo Online
The main advantage of trading using opposite Bank of America and GungHo Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, GungHo Online 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 GungHo Online will offset losses from the drop in GungHo Online's long position.| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Superior Plus Corp | Bank of America vs. SIVERS SEMICONDUCTORS AB |
| GungHo Online vs. Sea Limited | GungHo Online vs. Superior Plus Corp | GungHo Online vs. NMI Holdings | GungHo Online vs. SIVERS SEMICONDUCTORS 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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