Correlation Between Bank of America and China Mobile
Can any of the company-specific risk be diversified away by investing in both Bank of America and China Mobile 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 China Mobile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and China Mobile Limited, you can compare the effects of market volatilities on Bank of America and China Mobile 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 China Mobile. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and China Mobile.
Diversification Opportunities for Bank of America and China Mobile
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and China is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and China Mobile Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Mobile Limited 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 China Mobile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Mobile Limited has no effect on the direction of Bank of America i.e., Bank of America and China Mobile go up and down completely randomly.
Pair Corralation between Bank of America and China Mobile
Assuming the 90 days horizon Bank of America is expected to generate 7.89 times less return on investment than China Mobile. But when comparing it to its historical volatility, Verizon Communications is 2.76 times less risky than China Mobile. It trades about 0.03 of its potential returns per unit of risk. China Mobile Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 625.00 in China Mobile Limited on September 24, 2024 and sell it today you would earn a total of 231.00 from holding China Mobile Limited or generate 36.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Verizon Communications vs. China Mobile Limited
Performance |
| Timeline |
| Verizon Communications |
| China Mobile Limited |
Bank of America and China Mobile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and China Mobile
The main advantage of trading using opposite Bank of America and China Mobile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, China Mobile 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 China Mobile will offset losses from the drop in China Mobile's long position.| Bank of America vs. T Mobile | Bank of America vs. China Mobile Limited | Bank of America vs. ATT Inc | Bank of America vs. ATT Inc |
| China Mobile vs. T Mobile | China Mobile vs. Verizon Communications | China Mobile vs. ATT Inc | China Mobile vs. ATT Inc |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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