Correlation Between Bank of America and Taiwan Cement
Can any of the company-specific risk be diversified away by investing in both Bank of America and Taiwan Cement 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 Taiwan Cement into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Taiwan Cement Corp, you can compare the effects of market volatilities on Bank of America and Taiwan Cement 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 Taiwan Cement. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Taiwan Cement.
Diversification Opportunities for Bank of America and Taiwan Cement
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Taiwan is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Taiwan Cement Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taiwan Cement Corp 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 Bank of America are associated (or correlated) with Taiwan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taiwan Cement Corp has no effect on the direction of Bank of America i.e., Bank of America and Taiwan Cement go up and down completely randomly.
Pair Corralation between Bank of America and Taiwan Cement
Considering the 90-day investment horizon Bank of America is expected to generate 1.41 times more return on investment than Taiwan Cement. However, Bank of America is 1.41 times more volatile than Taiwan Cement Corp. It trades about -0.03 of its potential returns per unit of risk. Taiwan Cement Corp is currently generating about -0.16 per unit of risk. If you would invest 4,724 in Bank of America on October 26, 2024 and sell it today you would lose (72.00) from holding Bank of America or give up 1.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 93.02% |
| Values | Daily Returns |
Bank of America vs. Taiwan Cement Corp
Performance |
| Timeline |
| Bank of America |
| Taiwan Cement Corp |
Bank of America and Taiwan Cement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Taiwan Cement
The main advantage of trading using opposite Bank of America and Taiwan Cement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Taiwan Cement 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 Taiwan Cement will offset losses from the drop in Taiwan Cement's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC |
| Taiwan Cement vs. Asia Cement Corp | Taiwan Cement vs. Formosa Plastics Corp | Taiwan Cement vs. Nan Ya Plastics | Taiwan Cement vs. China Steel Corp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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