Correlation Between Bank of America and Destinations Global

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Can any of the company-specific risk be diversified away by investing in both Bank of America and Destinations Global 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 Destinations Global 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 Destinations Global Fixed, you can compare the effects of market volatilities on Bank of America and Destinations Global 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 Destinations Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Destinations Global.

Diversification Opportunities for Bank of America and Destinations Global

BankDestinationsDiversified AwayBankDestinationsDiversified Away100%
0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Bank and Destinations is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Destinations Global Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Destinations Global Fixed 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 Destinations Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Destinations Global Fixed has no effect on the direction of Bank of America i.e., Bank of America and Destinations Global go up and down completely randomly.

Pair Corralation between Bank of America and Destinations Global

Considering the 90-day investment horizon Bank of America is expected to generate 13.65 times more return on investment than Destinations Global. However, Bank of America is 13.65 times more volatile than Destinations Global Fixed. It trades about 0.09 of its potential returns per unit of risk. Destinations Global Fixed is currently generating about 0.31 per unit of risk. If you would invest  3,317  in Bank of America on November 26, 2024 and sell it today you would earn a total of  1,145  from holding Bank of America or generate 34.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.63%
ValuesDaily Returns

Bank of America  vs.  Destinations Global Fixed

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -4-2024
JavaScript chart by amCharts 3.21.15BAC DGFZX
       Timeline  
Bank of America 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of America is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb434445464748
Destinations Global Fixed 

Risk-Adjusted Performance

Strong

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Destinations Global Fixed are ranked lower than 30 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Destinations Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb9.459.59.559.69.65

Bank of America and Destinations Global Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-1.82-1.36-0.9-0.44-0.01520.390.851.311.772.23 10203040
JavaScript chart by amCharts 3.21.15BAC DGFZX
       Returns  

Pair Trading with Bank of America and Destinations Global

The main advantage of trading using opposite Bank of America and Destinations Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Destinations Global 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 Destinations Global will offset losses from the drop in Destinations Global's long position.
The idea behind Bank of America and Destinations Global Fixed pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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