Correlation Between Bank of America and Fast Retailing
Can any of the company-specific risk be diversified away by investing in both Bank of America and Fast Retailing 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 Fast Retailing 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 Fast Retailing Co, you can compare the effects of market volatilities on Bank of America and Fast Retailing 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 Fast Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Fast Retailing.
Diversification Opportunities for Bank of America and Fast Retailing
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Fast is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Fast Retailing Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fast Retailing 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 Fast Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fast Retailing has no effect on the direction of Bank of America i.e., Bank of America and Fast Retailing go up and down completely randomly.
Pair Corralation between Bank of America and Fast Retailing
Considering the 90-day investment horizon Bank of America is expected to generate 1.22 times less return on investment than Fast Retailing. But when comparing it to its historical volatility, Bank of America is 1.2 times less risky than Fast Retailing. It trades about 0.1 of its potential returns per unit of risk. Fast Retailing Co is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 23,680 in Fast Retailing Co on August 25, 2024 and sell it today you would earn a total of 6,300 from holding Fast Retailing Co or generate 26.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.95% |
| Values | Daily Returns |
Bank of America vs. Fast Retailing Co
Performance |
| Timeline |
| Bank of America |
| Fast Retailing |
Bank of America and Fast Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Fast Retailing
The main advantage of trading using opposite Bank of America and Fast Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Fast Retailing 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 Fast Retailing will offset losses from the drop in Fast Retailing's 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 |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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