Correlation Between Bank of America and Distribution Solutions
Can any of the company-specific risk be diversified away by investing in both Bank of America and Distribution Solutions 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 Distribution Solutions 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 Distribution Solutions Group, you can compare the effects of market volatilities on Bank of America and Distribution Solutions 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 Distribution Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Distribution Solutions.
Diversification Opportunities for Bank of America and Distribution Solutions
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Distribution is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Distribution Solutions Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribution Solutions 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 Distribution Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distribution Solutions has no effect on the direction of Bank of America i.e., Bank of America and Distribution Solutions go up and down completely randomly.
Pair Corralation between Bank of America and Distribution Solutions
Considering the 90-day investment horizon Bank of America is expected to generate 0.48 times more return on investment than Distribution Solutions. However, Bank of America is 2.06 times less risky than Distribution Solutions. It trades about 0.29 of its potential returns per unit of risk. Distribution Solutions Group is currently generating about -0.01 per unit of risk. If you would invest 4,231 in Bank of America on August 31, 2024 and sell it today you would earn a total of 546.00 from holding Bank of America or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Distribution Solutions Group
Performance |
| Timeline |
| Bank of America |
| Distribution Solutions |
Bank of America and Distribution Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Distribution Solutions
The main advantage of trading using opposite Bank of America and Distribution Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Distribution Solutions 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 Distribution Solutions will offset losses from the drop in Distribution Solutions' long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Distribution Solutions vs. Global Industrial Co | Distribution Solutions vs. Core Main | Distribution Solutions vs. Applied Industrial Technologies | Distribution Solutions vs. BlueLinx Holdings |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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