Correlation Between Bank of America and NetApp
Can any of the company-specific risk be diversified away by investing in both Bank of America and NetApp 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 NetApp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and NetApp Inc, you can compare the effects of market volatilities on Bank of America and NetApp 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 NetApp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and NetApp.
Diversification Opportunities for Bank of America and NetApp
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and NetApp is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and NetApp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetApp Inc 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 NetApp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetApp Inc has no effect on the direction of Bank of America i.e., Bank of America and NetApp go up and down completely randomly.
Pair Corralation between Bank of America and NetApp
Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.42 times more return on investment than NetApp. However, Verizon Communications is 2.4 times less risky than NetApp. It trades about 0.22 of its potential returns per unit of risk. NetApp Inc is currently generating about 0.08 per unit of risk. If you would invest 3,826 in Verizon Communications on September 12, 2024 and sell it today you would earn a total of 219.00 from holding Verizon Communications or generate 5.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. NetApp Inc
Performance |
| Timeline |
| Verizon Communications |
| NetApp Inc |
Bank of America and NetApp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and NetApp
The main advantage of trading using opposite Bank of America and NetApp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, NetApp 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 NetApp will offset losses from the drop in NetApp's long position.| Bank of America vs. Tencent Music Entertainment | Bank of America vs. ADRIATIC METALS LS 013355 | Bank of America vs. MAGIC SOFTWARE ENTR | Bank of America vs. MCEWEN MINING INC |
| NetApp vs. Pure Storage | NetApp vs. Teradata Corp | NetApp vs. Superior Plus Corp | NetApp vs. Origin Agritech |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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