Correlation Between Bank of America and Great China
Can any of the company-specific risk be diversified away by investing in both Bank of America and Great China 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 Great China 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 Great China Metal, you can compare the effects of market volatilities on Bank of America and Great China 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 Great China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Great China.
Diversification Opportunities for Bank of America and Great China
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Great is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Great China Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great China Metal 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 Great China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great China Metal has no effect on the direction of Bank of America i.e., Bank of America and Great China go up and down completely randomly.
Pair Corralation between Bank of America and Great China
Considering the 90-day investment horizon Bank of America is expected to generate 2.99 times more return on investment than Great China. However, Bank of America is 2.99 times more volatile than Great China Metal. It trades about 0.08 of its potential returns per unit of risk. Great China Metal is currently generating about 0.02 per unit of risk. If you would invest 4,452 in Bank of America on November 7, 2024 and sell it today you would earn a total of 219.00 from holding Bank of America or generate 4.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.92% |
| Values | Daily Returns |
Bank of America vs. Great China Metal
Performance |
| Timeline |
| Bank of America |
| Great China Metal |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Bank of America and Great China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Great China
The main advantage of trading using opposite Bank of America and Great China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Great China 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 Great China will offset losses from the drop in Great China's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Royal Bank of | Bank of America vs. Canadian Imperial Bank |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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