Correlation Between Bank of America and Fortum Oyj
Can any of the company-specific risk be diversified away by investing in both Bank of America and Fortum Oyj 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 Fortum Oyj 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 Fortum Oyj ADR, you can compare the effects of market volatilities on Bank of America and Fortum Oyj 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 Fortum Oyj. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Fortum Oyj.
Diversification Opportunities for Bank of America and Fortum Oyj
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Fortum is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Fortum Oyj ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortum Oyj ADR 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 Fortum Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortum Oyj ADR has no effect on the direction of Bank of America i.e., Bank of America and Fortum Oyj go up and down completely randomly.
Pair Corralation between Bank of America and Fortum Oyj
Considering the 90-day investment horizon Bank of America is expected to generate 0.81 times more return on investment than Fortum Oyj. However, Bank of America is 1.24 times less risky than Fortum Oyj. It trades about 0.05 of its potential returns per unit of risk. Fortum Oyj ADR is currently generating about 0.01 per unit of risk. If you would invest 3,278 in Bank of America on August 24, 2024 and sell it today you would earn a total of 1,431 from holding Bank of America or generate 43.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Fortum Oyj ADR
Performance |
| Timeline |
| Bank of America |
| Fortum Oyj ADR |
Bank of America and Fortum Oyj Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Fortum Oyj
The main advantage of trading using opposite Bank of America and Fortum Oyj positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Fortum Oyj 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 Fortum Oyj will offset losses from the drop in Fortum Oyj's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Fortum Oyj vs. Constellation Energy Corp | Fortum Oyj vs. Astra Energy | Fortum Oyj vs. Powertap Hydrogen Capital | Fortum Oyj vs. Brenmiller Energy Ltd |
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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