Correlation Between Bank of America and Zalando SE
Can any of the company-specific risk be diversified away by investing in both Bank of America and Zalando SE 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 Zalando SE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Zalando SE, you can compare the effects of market volatilities on Bank of America and Zalando SE 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 Zalando SE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Zalando SE.
Diversification Opportunities for Bank of America and Zalando SE
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Zalando is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Zalando SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zalando SE 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 Zalando SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zalando SE has no effect on the direction of Bank of America i.e., Bank of America and Zalando SE go up and down completely randomly.
Pair Corralation between Bank of America and Zalando SE
Assuming the 90 days trading horizon Bank of America is expected to generate 1.41 times less return on investment than Zalando SE. But when comparing it to its historical volatility, Verizon Communications is 1.72 times less risky than Zalando SE. It trades about 0.09 of its potential returns per unit of risk. Zalando SE is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,439 in Zalando SE on September 1, 2024 and sell it today you would earn a total of 499.00 from holding Zalando SE or generate 20.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Zalando SE
Performance |
| Timeline |
| Verizon Communications |
| Zalando SE |
Bank of America and Zalando SE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Zalando SE
The main advantage of trading using opposite Bank of America and Zalando SE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Zalando SE 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 Zalando SE will offset losses from the drop in Zalando SE's long position.| Bank of America vs. SIVERS SEMICONDUCTORS AB | Bank of America vs. Darden Restaurants | Bank of America vs. Reliance Steel Aluminum | Bank of America vs. Q2M Managementberatung AG |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories |