Correlation Between Bank of America and Aberdeen China
Can any of the company-specific risk be diversified away by investing in both Bank of America and Aberdeen China 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 Aberdeen China 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 Aberdeen China Oppty, you can compare the effects of market volatilities on Bank of America and Aberdeen China 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 Aberdeen China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Aberdeen China.
Diversification Opportunities for Bank of America and Aberdeen China
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Aberdeen is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Aberdeen China Oppty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen China Oppty 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 Aberdeen China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen China Oppty has no effect on the direction of Bank of America i.e., Bank of America and Aberdeen China go up and down completely randomly.
Pair Corralation between Bank of America and Aberdeen China
Considering the 90-day investment horizon Bank of America is expected to generate 1.16 times more return on investment than Aberdeen China. However, Bank of America is 1.16 times more volatile than Aberdeen China Oppty. It trades about 0.06 of its potential returns per unit of risk. Aberdeen China Oppty is currently generating about -0.03 per unit of risk. If you would invest 3,115 in Bank of America on September 3, 2024 and sell it today you would earn a total of 1,589 from holding Bank of America or generate 51.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Aberdeen China Oppty
Performance |
| Timeline |
| Bank of America |
| Aberdeen China Oppty |
Bank of America and Aberdeen China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Aberdeen China
The main advantage of trading using opposite Bank of America and Aberdeen China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Aberdeen China 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 Aberdeen China will offset losses from the drop in Aberdeen China's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| Aberdeen China vs. The Emerging Markets | Aberdeen China vs. Nasdaq 100 2x Strategy | Aberdeen China vs. Jpmorgan Emerging Markets | Aberdeen China vs. Mondrian Emerging Markets |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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