Correlation Between Bank of America and AXT
Can any of the company-specific risk be diversified away by investing in both Bank of America and AXT 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 AXT 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 AXT Inc, you can compare the effects of market volatilities on Bank of America and AXT 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 AXT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and AXT.
Diversification Opportunities for Bank of America and AXT
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and AXT is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and AXT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXT Inc 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 AXT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXT Inc has no effect on the direction of Bank of America i.e., Bank of America and AXT go up and down completely randomly.
Pair Corralation between Bank of America and AXT
Considering the 90-day investment horizon Bank of America is expected to generate 0.28 times more return on investment than AXT. However, Bank of America is 3.58 times less risky than AXT. It trades about 0.09 of its potential returns per unit of risk. AXT Inc is currently generating about -0.07 per unit of risk. If you would invest 4,540 in Bank of America on November 5, 2024 and sell it today you would earn a total of 90.00 from holding Bank of America or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. AXT Inc
Performance |
| Timeline |
| Bank of America |
| AXT Inc |
Bank of America and AXT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and AXT
The main advantage of trading using opposite Bank of America and AXT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, AXT 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 AXT will offset losses from the drop in AXT'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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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