Correlation Between Bank of America and Sims Metal
Can any of the company-specific risk be diversified away by investing in both Bank of America and Sims Metal 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 Sims Metal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Sims Metal Management, you can compare the effects of market volatilities on Bank of America and Sims Metal 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 Sims Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Sims Metal.
Diversification Opportunities for Bank of America and Sims Metal
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and Sims is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Sims Metal Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sims Metal Management 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 Sims Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sims Metal Management has no effect on the direction of Bank of America i.e., Bank of America and Sims Metal go up and down completely randomly.
Pair Corralation between Bank of America and Sims Metal
Assuming the 90 days trading horizon Bank of America is expected to generate 2.93 times less return on investment than Sims Metal. But when comparing it to its historical volatility, Verizon Communications is 1.78 times less risky than Sims Metal. It trades about 0.12 of its potential returns per unit of risk. Sims Metal Management is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 725.00 in Sims Metal Management on November 8, 2024 and sell it today you would earn a total of 65.00 from holding Sims Metal Management or generate 8.97% 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. Sims Metal Management
Performance |
| Timeline |
| Verizon Communications |
| Sims Metal Management |
Bank of America and Sims Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Sims Metal
The main advantage of trading using opposite Bank of America and Sims Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Sims Metal 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 Sims Metal will offset losses from the drop in Sims Metal's long position.| Bank of America vs. CORNISH METALS INC | Bank of America vs. DISTRICT METALS | Bank of America vs. Titan Machinery | Bank of America vs. GRIFFIN MINING LTD |
| Sims Metal vs. Harmony Gold Mining | Sims Metal vs. PennantPark Investment | Sims Metal vs. MCEWEN MINING INC | Sims Metal vs. GRIFFIN MINING LTD |
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.
Other Complementary Tools
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |