Correlation Between Bank of America and HomeToGo
Can any of the company-specific risk be diversified away by investing in both Bank of America and HomeToGo 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 HomeToGo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and HomeToGo SE, you can compare the effects of market volatilities on Bank of America and HomeToGo 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 HomeToGo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and HomeToGo.
Diversification Opportunities for Bank of America and HomeToGo
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and HomeToGo is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE 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 HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of Bank of America i.e., Bank of America and HomeToGo go up and down completely randomly.
Pair Corralation between Bank of America and HomeToGo
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.45 times more return on investment than HomeToGo. However, Verizon Communications is 2.24 times less risky than HomeToGo. It trades about 0.35 of its potential returns per unit of risk. HomeToGo SE is currently generating about -0.1 per unit of risk. If you would invest 3,821 in Verizon Communications on August 30, 2024 and sell it today you would earn a total of 394.00 from holding Verizon Communications or generate 10.31% 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. HomeToGo SE
Performance |
| Timeline |
| Verizon Communications |
| HomeToGo SE |
Bank of America and HomeToGo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and HomeToGo
The main advantage of trading using opposite Bank of America and HomeToGo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, HomeToGo 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 HomeToGo will offset losses from the drop in HomeToGo'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 |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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