Correlation Between Bank of America and Clarity Gold
Can any of the company-specific risk be diversified away by investing in both Bank of America and Clarity Gold 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 Clarity Gold 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 Clarity Gold Corp, you can compare the effects of market volatilities on Bank of America and Clarity Gold 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 Clarity Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Clarity Gold.
Diversification Opportunities for Bank of America and Clarity Gold
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Clarity is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Clarity Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarity Gold 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 Clarity Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarity Gold Corp has no effect on the direction of Bank of America i.e., Bank of America and Clarity Gold go up and down completely randomly.
Pair Corralation between Bank of America and Clarity Gold
Considering the 90-day investment horizon Bank of America is expected to generate 2.78 times less return on investment than Clarity Gold. But when comparing it to its historical volatility, Bank of America is 7.77 times less risky than Clarity Gold. It trades about 0.13 of its potential returns per unit of risk. Clarity Gold Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3.80 in Clarity Gold Corp on September 4, 2024 and sell it today you would lose (0.80) from holding Clarity Gold Corp or give up 21.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Bank of America vs. Clarity Gold Corp
Performance |
| Timeline |
| Bank of America |
| Clarity Gold Corp |
Bank of America and Clarity Gold Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Clarity Gold
The main advantage of trading using opposite Bank of America and Clarity Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Clarity Gold 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 Clarity Gold will offset losses from the drop in Clarity Gold's long position.| Bank of America vs. Citigroup | Bank of America vs. Aquagold International | Bank of America vs. Thrivent High Yield | Bank of America vs. Morningstar Unconstrained Allocation |
| Clarity Gold vs. Harmony Gold Mining | Clarity Gold vs. SPACE | Clarity Gold vs. T Rowe Price | Clarity Gold vs. Ampleforth |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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