Correlation Between Bank of America and Hanza AB
Can any of the company-specific risk be diversified away by investing in both Bank of America and Hanza AB 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 Hanza AB 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 Hanza AB, you can compare the effects of market volatilities on Bank of America and Hanza AB 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 Hanza AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Hanza AB.
Diversification Opportunities for Bank of America and Hanza AB
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Hanza is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Hanza AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanza AB 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 Hanza AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanza AB has no effect on the direction of Bank of America i.e., Bank of America and Hanza AB go up and down completely randomly.
Pair Corralation between Bank of America and Hanza AB
Considering the 90-day investment horizon Bank of America is expected to generate 1.19 times less return on investment than Hanza AB. But when comparing it to its historical volatility, Bank of America is 2.03 times less risky than Hanza AB. It trades about 0.27 of its potential returns per unit of risk. Hanza AB is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 5,950 in Hanza AB on August 29, 2024 and sell it today you would earn a total of 800.00 from holding Hanza AB or generate 13.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Hanza AB
Performance |
| Timeline |
| Bank of America |
| Hanza AB |
Bank of America and Hanza AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Hanza AB
The main advantage of trading using opposite Bank of America and Hanza AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Hanza AB 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 Hanza AB will offset losses from the drop in Hanza AB's 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 |
| Hanza AB vs. Hexatronic Group AB | Hanza AB vs. Instalco Intressenter AB | Hanza AB vs. NOTE AB | Hanza AB vs. Dometic Group AB |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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