Correlation Between Bank of America and Groove Botanicals
Can any of the company-specific risk be diversified away by investing in both Bank of America and Groove Botanicals 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 Groove Botanicals 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 Groove Botanicals, you can compare the effects of market volatilities on Bank of America and Groove Botanicals 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 Groove Botanicals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Groove Botanicals.
Diversification Opportunities for Bank of America and Groove Botanicals
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Groove is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Groove Botanicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groove Botanicals 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 Groove Botanicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groove Botanicals has no effect on the direction of Bank of America i.e., Bank of America and Groove Botanicals go up and down completely randomly.
Pair Corralation between Bank of America and Groove Botanicals
Considering the 90-day investment horizon Bank of America is expected to generate 14.83 times less return on investment than Groove Botanicals. But when comparing it to its historical volatility, Bank of America is 14.53 times less risky than Groove Botanicals. It trades about 0.06 of its potential returns per unit of risk. Groove Botanicals is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 5.98 in Groove Botanicals on August 30, 2024 and sell it today you would lose (5.49) from holding Groove Botanicals or give up 91.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Groove Botanicals
Performance |
| Timeline |
| Bank of America |
| Groove Botanicals |
Bank of America and Groove Botanicals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Groove Botanicals
The main advantage of trading using opposite Bank of America and Groove Botanicals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Groove Botanicals 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 Groove Botanicals will offset losses from the drop in Groove Botanicals' long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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