Correlation Between Bank of America and SEALED AIR
Can any of the company-specific risk be diversified away by investing in both Bank of America and SEALED AIR 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 SEALED AIR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and SEALED AIR , you can compare the effects of market volatilities on Bank of America and SEALED AIR 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 SEALED AIR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SEALED AIR.
Diversification Opportunities for Bank of America and SEALED AIR
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and SEALED is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and SEALED AIR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEALED AIR 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 SEALED AIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEALED AIR has no effect on the direction of Bank of America i.e., Bank of America and SEALED AIR go up and down completely randomly.
Pair Corralation between Bank of America and SEALED AIR
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.64 times more return on investment than SEALED AIR. However, Verizon Communications is 1.57 times less risky than SEALED AIR. It trades about 0.34 of its potential returns per unit of risk. SEALED AIR is currently generating about -0.13 per unit of risk. If you would invest 3,801 in Verizon Communications on December 1, 2024 and sell it today you would earn a total of 311.00 from holding Verizon Communications or generate 8.18% 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. SEALED AIR
Performance |
| Timeline |
| Verizon Communications |
| SEALED AIR |
Bank of America and SEALED AIR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SEALED AIR
The main advantage of trading using opposite Bank of America and SEALED AIR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SEALED AIR 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 SEALED AIR will offset losses from the drop in SEALED AIR's long position.| Bank of America vs. Gold Road Resources | Bank of America vs. QLEANAIR AB SK 50 | Bank of America vs. Yuexiu Transport Infrastructure | Bank of America vs. KAUFMAN ET BROAD |
| SEALED AIR vs. Rocket Internet SE | SEALED AIR vs. GMO INTERNET | SEALED AIR vs. China Modern Dairy | SEALED AIR vs. Chengdu PUTIAN Telecommunications |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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