Correlation Between Bank of America and DS Smith
Can any of the company-specific risk be diversified away by investing in both Bank of America and DS Smith 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 DS Smith 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 DS Smith PLC, you can compare the effects of market volatilities on Bank of America and DS Smith 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 DS Smith. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and DS Smith.
Diversification Opportunities for Bank of America and DS Smith
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and DITHF is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and DS Smith PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DS Smith PLC 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 DS Smith. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DS Smith PLC has no effect on the direction of Bank of America i.e., Bank of America and DS Smith go up and down completely randomly.
Pair Corralation between Bank of America and DS Smith
Considering the 90-day investment horizon Bank of America is expected to generate 2.34 times less return on investment than DS Smith. But when comparing it to its historical volatility, Bank of America is 2.24 times less risky than DS Smith. It trades about 0.06 of its potential returns per unit of risk. DS Smith PLC is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 361.00 in DS Smith PLC on September 3, 2024 and sell it today you would earn a total of 382.00 from holding DS Smith PLC or generate 105.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 88.08% |
| Values | Daily Returns |
Bank of America vs. DS Smith PLC
Performance |
| Timeline |
| Bank of America |
| DS Smith PLC |
Bank of America and DS Smith Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and DS Smith
The main advantage of trading using opposite Bank of America and DS Smith positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, DS Smith 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 DS Smith will offset losses from the drop in DS Smith's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| DS Smith vs. Diageo PLC ADR | DS Smith vs. Ambev SA ADR | DS Smith vs. Anheuser Busch Inbev | DS Smith vs. Westrock Coffee |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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