Correlation Between Bank of America and PChome Online
Can any of the company-specific risk be diversified away by investing in both Bank of America and PChome Online 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 PChome Online 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 PChome Online, you can compare the effects of market volatilities on Bank of America and PChome Online 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 PChome Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and PChome Online.
Diversification Opportunities for Bank of America and PChome Online
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and PChome is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and PChome Online in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PChome Online 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 PChome Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PChome Online has no effect on the direction of Bank of America i.e., Bank of America and PChome Online go up and down completely randomly.
Pair Corralation between Bank of America and PChome Online
Considering the 90-day investment horizon Bank of America is expected to generate 4.22 times less return on investment than PChome Online. But when comparing it to its historical volatility, Bank of America is 2.78 times less risky than PChome Online. It trades about 0.22 of its potential returns per unit of risk. PChome Online is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 3,490 in PChome Online on August 25, 2024 and sell it today you would earn a total of 1,670 from holding PChome Online or generate 47.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. PChome Online
Performance |
| Timeline |
| Bank of America |
| PChome Online |
Bank of America and PChome Online Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and PChome Online
The main advantage of trading using opposite Bank of America and PChome Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, PChome Online 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 PChome Online will offset losses from the drop in PChome Online's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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