Correlation Between Bank of America and Aker Carbon
Can any of the company-specific risk be diversified away by investing in both Bank of America and Aker Carbon 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 Aker Carbon 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 Aker Carbon Capture, you can compare the effects of market volatilities on Bank of America and Aker Carbon 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 Aker Carbon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Aker Carbon.
Diversification Opportunities for Bank of America and Aker Carbon
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Aker is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Aker Carbon Capture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aker Carbon Capture 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 Aker Carbon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aker Carbon Capture has no effect on the direction of Bank of America i.e., Bank of America and Aker Carbon go up and down completely randomly.
Pair Corralation between Bank of America and Aker Carbon
Considering the 90-day investment horizon Bank of America is expected to under-perform the Aker Carbon. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.98 times less risky than Aker Carbon. The stock trades about -0.16 of its potential returns per unit of risk. The Aker Carbon Capture is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 32.00 in Aker Carbon Capture on January 8, 2025 and sell it today you would lose (4.00) from holding Aker Carbon Capture or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Aker Carbon Capture
Performance |
| Timeline |
| Bank of America |
| Aker Carbon Capture |
Bank of America and Aker Carbon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Aker Carbon
The main advantage of trading using opposite Bank of America and Aker Carbon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Aker Carbon 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 Aker Carbon will offset losses from the drop in Aker Carbon'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. Royal Bank of |
| Aker Carbon vs. CO2 Solutions | Aker Carbon vs. LifeQuest World | Aker Carbon vs. TOMI Environmental Solutions | Aker Carbon vs. Zurn Elkay Water |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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