Correlation Between Bank of America and Charge Enterprises
Can any of the company-specific risk be diversified away by investing in both Bank of America and Charge Enterprises 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 Charge Enterprises 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 Charge Enterprises, you can compare the effects of market volatilities on Bank of America and Charge Enterprises 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 Charge Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Charge Enterprises.
Diversification Opportunities for Bank of America and Charge Enterprises
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Charge is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Charge Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charge Enterprises 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 Charge Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charge Enterprises has no effect on the direction of Bank of America i.e., Bank of America and Charge Enterprises go up and down completely randomly.
Pair Corralation between Bank of America and Charge Enterprises
Considering the 90-day investment horizon Bank of America is expected to generate 0.3 times more return on investment than Charge Enterprises. However, Bank of America is 3.34 times less risky than Charge Enterprises. It trades about 0.06 of its potential returns per unit of risk. Charge Enterprises is currently generating about -0.05 per unit of risk. If you would invest 3,138 in Bank of America on August 27, 2024 and sell it today you would earn a total of 1,562 from holding Bank of America or generate 49.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 31.85% |
| Values | Daily Returns |
Bank of America vs. Charge Enterprises
Performance |
| Timeline |
| Bank of America |
| Charge Enterprises |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank of America and Charge Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Charge Enterprises
The main advantage of trading using opposite Bank of America and Charge Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Charge Enterprises 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 Charge Enterprises will offset losses from the drop in Charge Enterprises' long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Charge Enterprises vs. Liberty Broadband Srs | Charge Enterprises vs. ATN International | Charge Enterprises vs. Shenandoah Telecommunications Co | Charge Enterprises vs. KT Corporation |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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