Correlation Between Bank of America and Canacol Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and Canacol Energy 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 Canacol Energy 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 Canacol Energy, you can compare the effects of market volatilities on Bank of America and Canacol Energy 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 Canacol Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Canacol Energy.
Diversification Opportunities for Bank of America and Canacol Energy
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Canacol is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Canacol Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canacol Energy 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 Canacol Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canacol Energy has no effect on the direction of Bank of America i.e., Bank of America and Canacol Energy go up and down completely randomly.
Pair Corralation between Bank of America and Canacol Energy
Considering the 90-day investment horizon Bank of America is expected to generate 2.21 times less return on investment than Canacol Energy. But when comparing it to its historical volatility, Bank of America is 2.33 times less risky than Canacol Energy. It trades about 0.29 of its potential returns per unit of risk. Canacol Energy is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 210.00 in Canacol Energy on August 31, 2024 and sell it today you would earn a total of 61.00 from holding Canacol Energy or generate 29.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Canacol Energy
Performance |
| Timeline |
| Bank of America |
| Canacol Energy |
Bank of America and Canacol Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Canacol Energy
The main advantage of trading using opposite Bank of America and Canacol Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Canacol Energy 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 Canacol Energy will offset losses from the drop in Canacol Energy's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Canacol Energy vs. PetroShale | Canacol Energy vs. Inpex Corp ADR | Canacol Energy vs. Battalion Oil Corp | Canacol Energy vs. Condor Petroleum |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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