Correlation Between Bank of America and East Japan
Can any of the company-specific risk be diversified away by investing in both Bank of America and East Japan 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 East Japan 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 East Japan Railway, you can compare the effects of market volatilities on Bank of America and East Japan 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 East Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and East Japan.
Diversification Opportunities for Bank of America and East Japan
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and East is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and East Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Japan Railway 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 East Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Japan Railway has no effect on the direction of Bank of America i.e., Bank of America and East Japan go up and down completely randomly.
Pair Corralation between Bank of America and East Japan
Considering the 90-day investment horizon Bank of America is expected to generate 0.78 times more return on investment than East Japan. However, Bank of America is 1.28 times less risky than East Japan. It trades about 0.11 of its potential returns per unit of risk. East Japan Railway is currently generating about -0.01 per unit of risk. If you would invest 3,217 in Bank of America on November 1, 2024 and sell it today you would earn a total of 1,458 from holding Bank of America or generate 45.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Bank of America vs. East Japan Railway
Performance |
| Timeline |
| Bank of America |
| East Japan Railway |
Bank of America and East Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and East Japan
The main advantage of trading using opposite Bank of America and East Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, East Japan 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 East Japan will offset losses from the drop in East Japan's long position.| Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Canadian Imperial Bank |
| East Japan vs. S E BANKEN A | East Japan vs. UNIQA INSURANCE GR | East Japan vs. BANKINTER ADR 2007 | East Japan vs. Yuexiu Transport Infrastructure |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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