Correlation Between Bank of America and Forth Smart
Can any of the company-specific risk be diversified away by investing in both Bank of America and Forth Smart 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 Forth Smart 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 Forth Smart Service, you can compare the effects of market volatilities on Bank of America and Forth Smart 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 Forth Smart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Forth Smart.
Diversification Opportunities for Bank of America and Forth Smart
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Forth is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Forth Smart Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forth Smart Service 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 Forth Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forth Smart Service has no effect on the direction of Bank of America i.e., Bank of America and Forth Smart go up and down completely randomly.
Pair Corralation between Bank of America and Forth Smart
Considering the 90-day investment horizon Bank of America is expected to generate 2.1 times less return on investment than Forth Smart. But when comparing it to its historical volatility, Bank of America is 2.9 times less risky than Forth Smart. It trades about 0.24 of its potential returns per unit of risk. Forth Smart Service is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 620.00 in Forth Smart Service on August 25, 2024 and sell it today you would earn a total of 230.00 from holding Forth Smart Service or generate 37.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.56% |
| Values | Daily Returns |
Bank of America vs. Forth Smart Service
Performance |
| Timeline |
| Bank of America |
| Forth Smart Service |
Bank of America and Forth Smart Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Forth Smart
The main advantage of trading using opposite Bank of America and Forth Smart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Forth Smart 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 Forth Smart will offset losses from the drop in Forth Smart'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 |
| Forth Smart vs. Hana Microelectronics Public | Forth Smart vs. Ekachai Medical Care | Forth Smart vs. Megachem Public | Forth Smart vs. Diamond Building Products |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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