Correlation Between Bank of America and Coastal Capital
Can any of the company-specific risk be diversified away by investing in both Bank of America and Coastal Capital 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 Coastal Capital 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 Coastal Capital Acq, you can compare the effects of market volatilities on Bank of America and Coastal Capital 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 Coastal Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Coastal Capital.
Diversification Opportunities for Bank of America and Coastal Capital
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Coastal is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Coastal Capital Acq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Capital Acq 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 Coastal Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Capital Acq has no effect on the direction of Bank of America i.e., Bank of America and Coastal Capital go up and down completely randomly.
Pair Corralation between Bank of America and Coastal Capital
Considering the 90-day investment horizon Bank of America is expected to generate 8.34 times less return on investment than Coastal Capital. But when comparing it to its historical volatility, Bank of America is 19.51 times less risky than Coastal Capital. It trades about 0.18 of its potential returns per unit of risk. Coastal Capital Acq is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.08 in Coastal Capital Acq on October 26, 2024 and sell it today you would lose (0.01) from holding Coastal Capital Acq or give up 12.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Bank of America vs. Coastal Capital Acq
Performance |
| Timeline |
| Bank of America |
| Coastal Capital Acq |
Bank of America and Coastal Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Coastal Capital
The main advantage of trading using opposite Bank of America and Coastal Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Coastal Capital 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 Coastal Capital will offset losses from the drop in Coastal Capital'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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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