Correlation Between Bank of America and Roche Holding
Can any of the company-specific risk be diversified away by investing in both Bank of America and Roche Holding 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 Roche Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Roche Holding Ltd, you can compare the effects of market volatilities on Bank of America and Roche Holding 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 Roche Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Roche Holding.
Diversification Opportunities for Bank of America and Roche Holding
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and Roche is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Roche Holding Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roche Holding 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 Roche Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roche Holding has no effect on the direction of Bank of America i.e., Bank of America and Roche Holding go up and down completely randomly.
Pair Corralation between Bank of America and Roche Holding
Assuming the 90 days trading horizon Bank of America is expected to generate 1.49 times less return on investment than Roche Holding. But when comparing it to its historical volatility, Verizon Communications is 2.06 times less risky than Roche Holding. It trades about 0.31 of its potential returns per unit of risk. Roche Holding Ltd is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,599 in Roche Holding Ltd on November 27, 2024 and sell it today you would earn a total of 355.00 from holding Roche Holding Ltd or generate 9.86% 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. Roche Holding Ltd
Performance |
| Timeline |
| Verizon Communications |
| Roche Holding |
Bank of America and Roche Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Roche Holding
The main advantage of trading using opposite Bank of America and Roche Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Roche Holding 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 Roche Holding will offset losses from the drop in Roche Holding's long position.| Bank of America vs. Collins Foods Limited | Bank of America vs. Perdoceo Education | Bank of America vs. China Modern Dairy | Bank of America vs. Waste Management |
| Roche Holding vs. Harmony Gold Mining | Roche Holding vs. Sumitomo Rubber Industries | Roche Holding vs. NEWELL RUBBERMAID | Roche Holding vs. Globex Mining Enterprises |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |