Correlation Between Bank of America and Eni SpA
Can any of the company-specific risk be diversified away by investing in both Bank of America and Eni SpA 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 Eni SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Eni SpA, you can compare the effects of market volatilities on Bank of America and Eni SpA 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 Eni SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Eni SpA.
Diversification Opportunities for Bank of America and Eni SpA
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Eni is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Eni SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA 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 Eni SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA has no effect on the direction of Bank of America i.e., Bank of America and Eni SpA go up and down completely randomly.
Pair Corralation between Bank of America and Eni SpA
Assuming the 90 days trading horizon Verizon Communications is expected to generate 1.12 times more return on investment than Eni SpA. However, Bank of America is 1.12 times more volatile than Eni SpA. It trades about 0.05 of its potential returns per unit of risk. Eni SpA is currently generating about -0.03 per unit of risk. If you would invest 3,633 in Verizon Communications on September 19, 2024 and sell it today you would earn a total of 255.00 from holding Verizon Communications or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Verizon Communications vs. Eni SpA
Performance |
| Timeline |
| Verizon Communications |
| Eni SpA |
Bank of America and Eni SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Eni SpA
The main advantage of trading using opposite Bank of America and Eni SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Eni SpA 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 Eni SpA will offset losses from the drop in Eni SpA's long position.| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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