Correlation Between Bank of America and Emerge Commerce
Can any of the company-specific risk be diversified away by investing in both Bank of America and Emerge Commerce 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 Emerge Commerce 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 Emerge Commerce, you can compare the effects of market volatilities on Bank of America and Emerge Commerce 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 Emerge Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Emerge Commerce.
Diversification Opportunities for Bank of America and Emerge Commerce
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Emerge is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Emerge Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerge Commerce 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 Emerge Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerge Commerce has no effect on the direction of Bank of America i.e., Bank of America and Emerge Commerce go up and down completely randomly.
Pair Corralation between Bank of America and Emerge Commerce
Considering the 90-day investment horizon Bank of America is expected to generate 86.93 times less return on investment than Emerge Commerce. But when comparing it to its historical volatility, Bank of America is 108.79 times less risky than Emerge Commerce. It trades about 0.27 of its potential returns per unit of risk. Emerge Commerce is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.12 in Emerge Commerce on August 31, 2024 and sell it today you would earn a total of 2.39 from holding Emerge Commerce or generate 1991.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. Emerge Commerce
Performance |
| Timeline |
| Bank of America |
| Emerge Commerce |
Bank of America and Emerge Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Emerge Commerce
The main advantage of trading using opposite Bank of America and Emerge Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Emerge Commerce 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 Emerge Commerce will offset losses from the drop in Emerge Commerce'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. Royal Bank of |
| Emerge Commerce vs. Phonex Inc | Emerge Commerce vs. Delivery Hero SE | Emerge Commerce vs. 1StdibsCom | Emerge Commerce vs. Natural Health Trend |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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