Correlation Between Bank of America and Tung Ho
Can any of the company-specific risk be diversified away by investing in both Bank of America and Tung Ho 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 Tung Ho 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 Tung Ho Textile, you can compare the effects of market volatilities on Bank of America and Tung Ho 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 Tung Ho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Tung Ho.
Diversification Opportunities for Bank of America and Tung Ho
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Tung is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Tung Ho Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tung Ho Textile 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 Tung Ho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tung Ho Textile has no effect on the direction of Bank of America i.e., Bank of America and Tung Ho go up and down completely randomly.
Pair Corralation between Bank of America and Tung Ho
Considering the 90-day investment horizon Bank of America is expected to generate 0.92 times more return on investment than Tung Ho. However, Bank of America is 1.09 times less risky than Tung Ho. It trades about 0.05 of its potential returns per unit of risk. Tung Ho Textile is currently generating about 0.04 per unit of risk. If you would invest 3,099 in Bank of America on November 27, 2024 and sell it today you would earn a total of 1,347 from holding Bank of America or generate 43.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.77% |
| Values | Daily Returns |
Bank of America vs. Tung Ho Textile
Performance |
| Timeline |
| Bank of America |
| Tung Ho Textile |
Bank of America and Tung Ho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Tung Ho
The main advantage of trading using opposite Bank of America and Tung Ho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Tung Ho 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 Tung Ho will offset losses from the drop in Tung Ho's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| Tung Ho vs. Shinkong Synthetic Fiber | Tung Ho vs. Tainan Spinning Co | Tung Ho vs. Zig Sheng Industrial | Tung Ho vs. Lealea Enterprise Co |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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