Correlation Between Bank of America and RF Materials

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Bank of America and RF Materials 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 RF Materials 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 RF Materials Co, you can compare the effects of market volatilities on Bank of America and RF Materials 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 RF Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and RF Materials.

Diversification Opportunities for Bank of America and RF Materials

-0.46
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and 327260 is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and RF Materials Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Materials 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 RF Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Materials has no effect on the direction of Bank of America i.e., Bank of America and RF Materials go up and down completely randomly.

Pair Corralation between Bank of America and RF Materials

Considering the 90-day investment horizon Bank of America is expected to generate 0.45 times more return on investment than RF Materials. However, Bank of America is 2.21 times less risky than RF Materials. It trades about 0.13 of its potential returns per unit of risk. RF Materials Co is currently generating about -0.08 per unit of risk. If you would invest  3,290  in Bank of America on August 29, 2024 and sell it today you would earn a total of  1,496  from holding Bank of America or generate 45.46% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.69%
ValuesDaily Returns

Bank of America  vs.  RF Materials Co

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.
RF Materials 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days RF Materials Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Bank of America and RF Materials Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and RF Materials

The main advantage of trading using opposite Bank of America and RF Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, RF Materials 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 RF Materials will offset losses from the drop in RF Materials' long position.
The idea behind Bank of America and RF Materials Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

Other Complementary Tools

Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
AI Portfolio Architect
Use AI to generate optimal portfolios and find profitable investment opportunities
Investing Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences