Correlation Between Bank of America and Japan Post
Can any of the company-specific risk be diversified away by investing in both Bank of America and Japan Post 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 Japan Post into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Japan Post Insurance, you can compare the effects of market volatilities on Bank of America and Japan Post 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 Japan Post. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Japan Post.
Diversification Opportunities for Bank of America and Japan Post
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and Japan is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Japan Post Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Post Insurance 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 Japan Post. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Post Insurance has no effect on the direction of Bank of America i.e., Bank of America and Japan Post go up and down completely randomly.
Pair Corralation between Bank of America and Japan Post
Assuming the 90 days trading horizon Bank of America is expected to generate 2.99 times less return on investment than Japan Post. But when comparing it to its historical volatility, Verizon Communications is 1.92 times less risky than Japan Post. It trades about 0.33 of its potential returns per unit of risk. Japan Post Insurance is currently generating about 0.52 of returns per unit of risk over similar time horizon. If you would invest 1,470 in Japan Post Insurance on August 28, 2024 and sell it today you would earn a total of 440.00 from holding Japan Post Insurance or generate 29.93% 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. Japan Post Insurance
Performance |
| Timeline |
| Verizon Communications |
| Japan Post Insurance |
Bank of America and Japan Post Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Japan Post
The main advantage of trading using opposite Bank of America and Japan Post positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Japan Post 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 Japan Post will offset losses from the drop in Japan Post's long position.| Bank of America vs. MSAD INSURANCE | Bank of America vs. Selective Insurance Group | Bank of America vs. LIFENET INSURANCE CO | Bank of America vs. Singapore Telecommunications Limited |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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