Correlation Between Bank of America and Bioelectronics Corp
Can any of the company-specific risk be diversified away by investing in both Bank of America and Bioelectronics Corp 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 Bioelectronics Corp 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 Bioelectronics Corp, you can compare the effects of market volatilities on Bank of America and Bioelectronics Corp 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 Bioelectronics Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Bioelectronics Corp.
Diversification Opportunities for Bank of America and Bioelectronics Corp
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Bioelectronics is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Bioelectronics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bioelectronics Corp 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 Bioelectronics Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bioelectronics Corp has no effect on the direction of Bank of America i.e., Bank of America and Bioelectronics Corp go up and down completely randomly.
Pair Corralation between Bank of America and Bioelectronics Corp
Considering the 90-day investment horizon Bank of America is expected to generate 43.52 times less return on investment than Bioelectronics Corp. But when comparing it to its historical volatility, Bank of America is 17.94 times less risky than Bioelectronics Corp. It trades about 0.05 of its potential returns per unit of risk. Bioelectronics Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 0.05 in Bioelectronics Corp on October 30, 2024 and sell it today you would lose (0.03) from holding Bioelectronics Corp or give up 60.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Bioelectronics Corp
Performance |
| Timeline |
| Bank of America |
| Bioelectronics Corp |
Bank of America and Bioelectronics Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Bioelectronics Corp
The main advantage of trading using opposite Bank of America and Bioelectronics Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Bioelectronics Corp 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 Bioelectronics Corp will offset losses from the drop in Bioelectronics Corp's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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