Correlation Between Bank of America and Crestwood Equity
Can any of the company-specific risk be diversified away by investing in both Bank of America and Crestwood Equity 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 Crestwood Equity 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 Crestwood Equity Partners, you can compare the effects of market volatilities on Bank of America and Crestwood Equity 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 Crestwood Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Crestwood Equity.
Diversification Opportunities for Bank of America and Crestwood Equity
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Crestwood is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Crestwood Equity Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crestwood Equity Partners 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 Crestwood Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crestwood Equity Partners has no effect on the direction of Bank of America i.e., Bank of America and Crestwood Equity go up and down completely randomly.
Pair Corralation between Bank of America and Crestwood Equity
Considering the 90-day investment horizon Bank of America is expected to generate 0.9 times more return on investment than Crestwood Equity. However, Bank of America is 1.11 times less risky than Crestwood Equity. It trades about 0.05 of its potential returns per unit of risk. Crestwood Equity Partners is currently generating about 0.03 per unit of risk. If you would invest 3,278 in Bank of America on August 24, 2024 and sell it today you would earn a total of 1,422 from holding Bank of America or generate 43.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 32.06% |
| Values | Daily Returns |
Bank of America vs. Crestwood Equity Partners
Performance |
| Timeline |
| Bank of America |
| Crestwood Equity Partners |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank of America and Crestwood Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Crestwood Equity
The main advantage of trading using opposite Bank of America and Crestwood Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Crestwood Equity 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 Crestwood Equity will offset losses from the drop in Crestwood Equity's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Crestwood Equity vs. Western Midstream Partners | Crestwood Equity vs. DT Midstream | Crestwood Equity vs. MPLX LP | Crestwood Equity vs. Enterprise Products Partners |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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