Correlation Between Bank of America and Djurslands Bank
Can any of the company-specific risk be diversified away by investing in both Bank of America and Djurslands Bank 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 Djurslands Bank 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 Djurslands Bank, you can compare the effects of market volatilities on Bank of America and Djurslands Bank 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 Djurslands Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Djurslands Bank.
Diversification Opportunities for Bank of America and Djurslands Bank
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Djurslands is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Djurslands Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Djurslands Bank 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 Djurslands Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Djurslands Bank has no effect on the direction of Bank of America i.e., Bank of America and Djurslands Bank go up and down completely randomly.
Pair Corralation between Bank of America and Djurslands Bank
Considering the 90-day investment horizon Bank of America is expected to generate 1.8 times more return on investment than Djurslands Bank. However, Bank of America is 1.8 times more volatile than Djurslands Bank. It trades about 0.18 of its potential returns per unit of risk. Djurslands Bank is currently generating about -0.03 per unit of risk. If you would invest 3,991 in Bank of America on August 29, 2024 and sell it today you would earn a total of 784.00 from holding Bank of America or generate 19.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.46% |
| Values | Daily Returns |
Bank of America vs. Djurslands Bank
Performance |
| Timeline |
| Bank of America |
| Djurslands Bank |
Bank of America and Djurslands Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Djurslands Bank
The main advantage of trading using opposite Bank of America and Djurslands Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Djurslands Bank 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 Djurslands Bank will offset losses from the drop in Djurslands Bank's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
| Djurslands Bank vs. Skjern Bank AS | Djurslands Bank vs. Lollands Bank | Djurslands Bank vs. Kreditbanken AS | Djurslands Bank vs. Fynske Bank AS |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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