Correlation Between Bank of America and APPLIED MATERIALS
Can any of the company-specific risk be diversified away by investing in both Bank of America and APPLIED MATERIALS 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 APPLIED MATERIALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and APPLIED MATERIALS, you can compare the effects of market volatilities on Bank of America and APPLIED MATERIALS 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 APPLIED MATERIALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and APPLIED MATERIALS.
Diversification Opportunities for Bank of America and APPLIED MATERIALS
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and APPLIED is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and APPLIED MATERIALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLIED MATERIALS 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 APPLIED MATERIALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLIED MATERIALS has no effect on the direction of Bank of America i.e., Bank of America and APPLIED MATERIALS go up and down completely randomly.
Pair Corralation between Bank of America and APPLIED MATERIALS
Assuming the 90 days horizon Bank of America is expected to generate 1.01 times less return on investment than APPLIED MATERIALS. But when comparing it to its historical volatility, Verizon Communications is 1.72 times less risky than APPLIED MATERIALS. It trades about 0.07 of its potential returns per unit of risk. APPLIED MATERIALS is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12,489 in APPLIED MATERIALS on September 1, 2024 and sell it today you would earn a total of 4,043 from holding APPLIED MATERIALS or generate 32.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Verizon Communications vs. APPLIED MATERIALS
Performance |
| Timeline |
| Verizon Communications |
| APPLIED MATERIALS |
Bank of America and APPLIED MATERIALS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and APPLIED MATERIALS
The main advantage of trading using opposite Bank of America and APPLIED MATERIALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, APPLIED MATERIALS 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 APPLIED MATERIALS will offset losses from the drop in APPLIED MATERIALS's long position.| Bank of America vs. Direct Line Insurance | Bank of America vs. Harmony Gold Mining | Bank of America vs. The Hanover Insurance | Bank of America vs. Jacquet Metal Service |
| APPLIED MATERIALS vs. QBE Insurance Group | APPLIED MATERIALS vs. Selective Insurance Group | APPLIED MATERIALS vs. Singapore Reinsurance | APPLIED MATERIALS vs. United Natural Foods |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |