Correlation Between Bank of America and Hiru
Can any of the company-specific risk be diversified away by investing in both Bank of America and Hiru 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 Hiru 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 Hiru Corporation, you can compare the effects of market volatilities on Bank of America and Hiru 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 Hiru. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Hiru.
Diversification Opportunities for Bank of America and Hiru
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Hiru is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Hiru Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiru 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 Hiru. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiru has no effect on the direction of Bank of America i.e., Bank of America and Hiru go up and down completely randomly.
Pair Corralation between Bank of America and Hiru
Considering the 90-day investment horizon Bank of America is expected to generate 6.08 times less return on investment than Hiru. But when comparing it to its historical volatility, Bank of America is 10.66 times less risky than Hiru. It trades about 0.09 of its potential returns per unit of risk. Hiru Corporation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 0.46 in Hiru Corporation on September 12, 2024 and sell it today you would lose (0.33) from holding Hiru Corporation or give up 71.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Hiru Corp.
Performance |
| Timeline |
| Bank of America |
| Hiru |
Bank of America and Hiru Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Hiru
The main advantage of trading using opposite Bank of America and Hiru positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Hiru 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 Hiru will offset losses from the drop in Hiru's long position.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. Victory Integrity Smallmid Cap | Bank of America vs. Hilton Worldwide Holdings | Bank of America vs. NVIDIA |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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