Correlation Between Bank of America and Descartes Systems
Can any of the company-specific risk be diversified away by investing in both Bank of America and Descartes Systems 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 Descartes Systems 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 Descartes Systems Group, you can compare the effects of market volatilities on Bank of America and Descartes Systems 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 Descartes Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Descartes Systems.
Diversification Opportunities for Bank of America and Descartes Systems
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Descartes is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Descartes Systems Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Descartes Systems 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 Descartes Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Descartes Systems has no effect on the direction of Bank of America i.e., Bank of America and Descartes Systems go up and down completely randomly.
Pair Corralation between Bank of America and Descartes Systems
Considering the 90-day investment horizon Bank of America is expected to generate 1.29 times less return on investment than Descartes Systems. In addition to that, Bank of America is 1.14 times more volatile than Descartes Systems Group. It trades about 0.06 of its total potential returns per unit of risk. Descartes Systems Group is currently generating about 0.09 per unit of volatility. If you would invest 6,679 in Descartes Systems Group on August 27, 2024 and sell it today you would earn a total of 4,929 from holding Descartes Systems Group or generate 73.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Descartes Systems Group
Performance |
| Timeline |
| Bank of America |
| Descartes Systems |
Bank of America and Descartes Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Descartes Systems
The main advantage of trading using opposite Bank of America and Descartes Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Descartes Systems 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 Descartes Systems will offset losses from the drop in Descartes Systems' long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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