Correlation Between Bank of America and Intl Star
Can any of the company-specific risk be diversified away by investing in both Bank of America and Intl Star 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 Intl Star 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 Intl Star, you can compare the effects of market volatilities on Bank of America and Intl Star 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 Intl Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Intl Star.
Diversification Opportunities for Bank of America and Intl Star
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Intl is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Intl Star in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intl Star 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 Intl Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intl Star has no effect on the direction of Bank of America i.e., Bank of America and Intl Star go up and down completely randomly.
Pair Corralation between Bank of America and Intl Star
Considering the 90-day investment horizon Bank of America is expected to generate 9.36 times less return on investment than Intl Star. But when comparing it to its historical volatility, Bank of America is 11.1 times less risky than Intl Star. It trades about 0.1 of its potential returns per unit of risk. Intl Star is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.04 in Intl Star on August 31, 2024 and sell it today you would earn a total of 0.04 from holding Intl Star or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Bank of America vs. Intl Star
Performance |
| Timeline |
| Bank of America |
| Intl Star |
Bank of America and Intl Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Intl Star
The main advantage of trading using opposite Bank of America and Intl Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Intl Star 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 Intl Star will offset losses from the drop in Intl Star's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Intl Star vs. American Leisure Holdings | Intl Star vs. Absolute Health and | Intl Star vs. Supurva Healthcare Group | Intl Star vs. China Health Management |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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