Correlation Between Bank of America and SK Chemicals
Can any of the company-specific risk be diversified away by investing in both Bank of America and SK Chemicals 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 SK Chemicals 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 SK Chemicals Co, you can compare the effects of market volatilities on Bank of America and SK Chemicals 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 SK Chemicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SK Chemicals.
Diversification Opportunities for Bank of America and SK Chemicals
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and 285130 is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SK Chemicals Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SK Chemicals 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 SK Chemicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SK Chemicals has no effect on the direction of Bank of America i.e., Bank of America and SK Chemicals go up and down completely randomly.
Pair Corralation between Bank of America and SK Chemicals
Considering the 90-day investment horizon Bank of America is expected to under-perform the SK Chemicals. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.99 times less risky than SK Chemicals. The stock trades about -0.31 of its potential returns per unit of risk. The SK Chemicals Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 4,140,000 in SK Chemicals Co on November 27, 2024 and sell it today you would earn a total of 320,000 from holding SK Chemicals Co or generate 7.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 85.0% |
| Values | Daily Returns |
Bank of America vs. SK Chemicals Co
Performance |
| Timeline |
| Bank of America |
| SK Chemicals |
Bank of America and SK Chemicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SK Chemicals
The main advantage of trading using opposite Bank of America and SK Chemicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SK Chemicals 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 SK Chemicals will offset losses from the drop in SK Chemicals' 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 |
| SK Chemicals vs. LG Chemicals | SK Chemicals vs. POSCO Holdings | SK Chemicals vs. Hanwha Solutions | SK Chemicals vs. Lotte Chemical 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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