Correlation Between Bank of America and Aurizon Holdings
Can any of the company-specific risk be diversified away by investing in both Bank of America and Aurizon Holdings 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 Aurizon Holdings 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 Aurizon Holdings, you can compare the effects of market volatilities on Bank of America and Aurizon Holdings 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 Aurizon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Aurizon Holdings.
Diversification Opportunities for Bank of America and Aurizon Holdings
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Aurizon is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Aurizon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurizon Holdings 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 Aurizon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurizon Holdings has no effect on the direction of Bank of America i.e., Bank of America and Aurizon Holdings go up and down completely randomly.
Pair Corralation between Bank of America and Aurizon Holdings
Considering the 90-day investment horizon Bank of America is expected to under-perform the Aurizon Holdings. In addition to that, Bank of America is 3.51 times more volatile than Aurizon Holdings. It trades about -0.11 of its total potential returns per unit of risk. Aurizon Holdings is currently generating about -0.05 per unit of volatility. If you would invest 308.00 in Aurizon Holdings on January 12, 2025 and sell it today you would lose (4.00) from holding Aurizon Holdings or give up 1.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Aurizon Holdings
Performance |
| Timeline |
| Bank of America |
| Aurizon Holdings |
Bank of America and Aurizon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Aurizon Holdings
The main advantage of trading using opposite Bank of America and Aurizon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Aurizon Holdings 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 Aurizon Holdings will offset losses from the drop in Aurizon Holdings' 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 |
| Aurizon Holdings vs. Aneka Tambang Tbk | Aurizon Holdings vs. BHP Group Limited | Aurizon Holdings vs. Rio Tinto | Aurizon Holdings vs. Commonwealth Bank of |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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