Correlation Between Bank of America and Neo Cremar
Can any of the company-specific risk be diversified away by investing in both Bank of America and Neo Cremar 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 Neo Cremar 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 Neo Cremar Co, you can compare the effects of market volatilities on Bank of America and Neo Cremar 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 Neo Cremar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Neo Cremar.
Diversification Opportunities for Bank of America and Neo Cremar
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Neo is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Neo Cremar Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neo Cremar 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 Neo Cremar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neo Cremar has no effect on the direction of Bank of America i.e., Bank of America and Neo Cremar go up and down completely randomly.
Pair Corralation between Bank of America and Neo Cremar
Considering the 90-day investment horizon Bank of America is expected to generate 1.25 times less return on investment than Neo Cremar. But when comparing it to its historical volatility, Bank of America is 1.26 times less risky than Neo Cremar. It trades about 0.11 of its potential returns per unit of risk. Neo Cremar Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 593,000 in Neo Cremar Co on August 29, 2024 and sell it today you would earn a total of 149,000 from holding Neo Cremar Co or generate 25.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.03% |
| Values | Daily Returns |
Bank of America vs. Neo Cremar Co
Performance |
| Timeline |
| Bank of America |
| Neo Cremar |
Bank of America and Neo Cremar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Neo Cremar
The main advantage of trading using opposite Bank of America and Neo Cremar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Neo Cremar 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 Neo Cremar will offset losses from the drop in Neo Cremar'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. JPMorgan Chase Co |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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