Correlation Between Bank of America and Kubota
Can any of the company-specific risk be diversified away by investing in both Bank of America and Kubota 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 Kubota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Kubota, you can compare the effects of market volatilities on Bank of America and Kubota 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 Kubota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Kubota.
Diversification Opportunities for Bank of America and Kubota
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Kubota is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Bank of America i.e., Bank of America and Kubota go up and down completely randomly.
Pair Corralation between Bank of America and Kubota
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.73 times more return on investment than Kubota. However, Verizon Communications is 1.37 times less risky than Kubota. It trades about 0.26 of its potential returns per unit of risk. Kubota is currently generating about -0.02 per unit of risk. If you would invest 3,907 in Verizon Communications on September 1, 2024 and sell it today you would earn a total of 268.00 from holding Verizon Communications or generate 6.86% 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. Kubota
Performance |
| Timeline |
| Verizon Communications |
| Kubota |
Bank of America and Kubota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Kubota
The main advantage of trading using opposite Bank of America and Kubota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Kubota 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 Kubota will offset losses from the drop in Kubota's long position.| Bank of America vs. Regions Financial | Bank of America vs. Shin Etsu Chemical Co | Bank of America vs. Sumitomo Chemical | Bank of America vs. CHEMICAL INDUSTRIES |
| Kubota vs. KRISPY KREME DL 01 | Kubota vs. TOWNSQUARE MEDIA INC | Kubota vs. Verizon Communications | Kubota vs. Ribbon 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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