Correlation Between Bank of America and Caledonia Mining
Can any of the company-specific risk be diversified away by investing in both Bank of America and Caledonia Mining 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 Caledonia Mining 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 Caledonia Mining, you can compare the effects of market volatilities on Bank of America and Caledonia Mining 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 Caledonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Caledonia Mining.
Diversification Opportunities for Bank of America and Caledonia Mining
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and Caledonia is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Bank of America i.e., Bank of America and Caledonia Mining go up and down completely randomly.
Pair Corralation between Bank of America and Caledonia Mining
Considering the 90-day investment horizon Bank of America is expected to generate 3.4 times less return on investment than Caledonia Mining. But when comparing it to its historical volatility, Bank of America is 1.61 times less risky than Caledonia Mining. It trades about 0.15 of its potential returns per unit of risk. Caledonia Mining is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 915.00 in Caledonia Mining on November 8, 2024 and sell it today you would earn a total of 118.00 from holding Caledonia Mining or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Caledonia Mining
Performance |
| Timeline |
| Bank of America |
| Caledonia Mining |
Bank of America and Caledonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Caledonia Mining
The main advantage of trading using opposite Bank of America and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Caledonia Mining 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 Caledonia Mining will offset losses from the drop in Caledonia Mining's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Canadian Imperial Bank | Bank of America vs. Bank of Montreal |
| Caledonia Mining vs. DRDGOLD Limited ADR | Caledonia Mining vs. Galiano Gold | Caledonia Mining vs. Mastech Holdings | Caledonia Mining vs. EMX Royalty Corp |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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