Correlation Between Bank of America and Active Biotech
Can any of the company-specific risk be diversified away by investing in both Bank of America and Active Biotech 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 Active Biotech 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 Active Biotech AB, you can compare the effects of market volatilities on Bank of America and Active Biotech 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 Active Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Active Biotech.
Diversification Opportunities for Bank of America and Active Biotech
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Active is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Active Biotech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active Biotech AB 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 Active Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active Biotech AB has no effect on the direction of Bank of America i.e., Bank of America and Active Biotech go up and down completely randomly.
Pair Corralation between Bank of America and Active Biotech
Considering the 90-day investment horizon Bank of America is expected to generate 5.59 times less return on investment than Active Biotech. But when comparing it to its historical volatility, Bank of America is 10.18 times less risky than Active Biotech. It trades about 0.35 of its potential returns per unit of risk. Active Biotech AB is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Active Biotech AB on September 3, 2024 and sell it today you would earn a total of 11.00 from holding Active Biotech AB or generate 68.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Bank of America vs. Active Biotech AB
Performance |
| Timeline |
| Bank of America |
| Active Biotech AB |
Bank of America and Active Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Active Biotech
The main advantage of trading using opposite Bank of America and Active Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Active Biotech 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 Active Biotech will offset losses from the drop in Active Biotech's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| Active Biotech vs. BioInvent International AB | Active Biotech vs. Alligator Bioscience AB | Active Biotech vs. Swedish Orphan Biovitrum | Active Biotech vs. Anoto Group AB |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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