Correlation Between Bank of America and Commonwealth Japan
Can any of the company-specific risk be diversified away by investing in both Bank of America and Commonwealth Japan 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 Commonwealth Japan 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 Commonwealth Japan Fund, you can compare the effects of market volatilities on Bank of America and Commonwealth Japan 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 Commonwealth Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Commonwealth Japan.
Diversification Opportunities for Bank of America and Commonwealth Japan
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Commonwealth is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Commonwealth Japan Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Japan 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 Commonwealth Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Japan has no effect on the direction of Bank of America i.e., Bank of America and Commonwealth Japan go up and down completely randomly.
Pair Corralation between Bank of America and Commonwealth Japan
Considering the 90-day investment horizon Bank of America is expected to generate 1.41 times more return on investment than Commonwealth Japan. However, Bank of America is 1.41 times more volatile than Commonwealth Japan Fund. It trades about 0.06 of its potential returns per unit of risk. Commonwealth Japan Fund is currently generating about 0.03 per unit of risk. If you would invest 3,085 in Bank of America on August 29, 2024 and sell it today you would earn a total of 1,692 from holding Bank of America or generate 54.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Commonwealth Japan Fund
Performance |
| Timeline |
| Bank of America |
| Commonwealth Japan |
Bank of America and Commonwealth Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Commonwealth Japan
The main advantage of trading using opposite Bank of America and Commonwealth Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Commonwealth Japan 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 Commonwealth Japan will offset losses from the drop in Commonwealth Japan's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
| Commonwealth Japan vs. Hennessy Japan Fund | Commonwealth Japan vs. Hennessy Japan Fund | Commonwealth Japan vs. Wasatch Emerging India | Commonwealth Japan vs. Global Opportunity Portfolio |
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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