Correlation Between Bank of America and ESCO Technologies
Can any of the company-specific risk be diversified away by investing in both Bank of America and ESCO Technologies 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 ESCO Technologies 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 ESCO Technologies, you can compare the effects of market volatilities on Bank of America and ESCO Technologies 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 ESCO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and ESCO Technologies.
Diversification Opportunities for Bank of America and ESCO Technologies
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and ESCO is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ESCO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESCO Technologies 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 ESCO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESCO Technologies has no effect on the direction of Bank of America i.e., Bank of America and ESCO Technologies go up and down completely randomly.
Pair Corralation between Bank of America and ESCO Technologies
Considering the 90-day investment horizon Bank of America is expected to generate 1.39 times less return on investment than ESCO Technologies. But when comparing it to its historical volatility, Bank of America is 1.18 times less risky than ESCO Technologies. It trades about 0.24 of its potential returns per unit of risk. ESCO Technologies is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 13,007 in ESCO Technologies on August 27, 2024 and sell it today you would earn a total of 1,887 from holding ESCO Technologies or generate 14.51% 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. ESCO Technologies
Performance |
| Timeline |
| Bank of America |
| ESCO Technologies |
Bank of America and ESCO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and ESCO Technologies
The main advantage of trading using opposite Bank of America and ESCO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, ESCO Technologies 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 ESCO Technologies will offset losses from the drop in ESCO Technologies' long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| ESCO Technologies vs. Novanta | ESCO Technologies vs. Sono Tek Corp | ESCO Technologies vs. Itron Inc | ESCO Technologies vs. Badger Meter |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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