Correlation Between Bank of America and TOPBI International
Can any of the company-specific risk be diversified away by investing in both Bank of America and TOPBI International 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 TOPBI International 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 TOPBI International Holdings, you can compare the effects of market volatilities on Bank of America and TOPBI International 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 TOPBI International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and TOPBI International.
Diversification Opportunities for Bank of America and TOPBI International
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and TOPBI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and TOPBI International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOPBI International 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 TOPBI International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOPBI International has no effect on the direction of Bank of America i.e., Bank of America and TOPBI International go up and down completely randomly.
Pair Corralation between Bank of America and TOPBI International
Considering the 90-day investment horizon Bank of America is expected to generate 2.59 times less return on investment than TOPBI International. But when comparing it to its historical volatility, Bank of America is 2.21 times less risky than TOPBI International. It trades about 0.11 of its potential returns per unit of risk. TOPBI International Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 942.00 in TOPBI International Holdings on September 2, 2024 and sell it today you would earn a total of 563.00 from holding TOPBI International Holdings or generate 59.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Bank of America vs. TOPBI International Holdings
Performance |
| Timeline |
| Bank of America |
| TOPBI International |
Bank of America and TOPBI International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and TOPBI International
The main advantage of trading using opposite Bank of America and TOPBI International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, TOPBI International 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 TOPBI International will offset losses from the drop in TOPBI International's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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