Correlation Between Bank of America and Defense Metals
Can any of the company-specific risk be diversified away by investing in both Bank of America and Defense Metals 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 Defense Metals 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 Defense Metals Corp, you can compare the effects of market volatilities on Bank of America and Defense Metals 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 Defense Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Defense Metals.
Diversification Opportunities for Bank of America and Defense Metals
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Defense is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Defense Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Defense Metals 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 Defense Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Defense Metals Corp has no effect on the direction of Bank of America i.e., Bank of America and Defense Metals go up and down completely randomly.
Pair Corralation between Bank of America and Defense Metals
Considering the 90-day investment horizon Bank of America is expected to generate 0.51 times more return on investment than Defense Metals. However, Bank of America is 1.95 times less risky than Defense Metals. It trades about 0.22 of its potential returns per unit of risk. Defense Metals Corp is currently generating about 0.01 per unit of risk. If you would invest 4,265 in Bank of America on August 25, 2024 and sell it today you would earn a total of 435.00 from holding Bank of America or generate 10.2% 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. Defense Metals Corp
Performance |
| Timeline |
| Bank of America |
| Defense Metals Corp |
Bank of America and Defense Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Defense Metals
The main advantage of trading using opposite Bank of America and Defense Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Defense Metals 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 Defense Metals will offset losses from the drop in Defense Metals' 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 |
| Defense Metals vs. Edison Cobalt Corp | Defense Metals vs. Baroyeca Gold Silver | Defense Metals vs. Aurelia Metals Limited | Defense Metals vs. China Rare Earth |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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