Correlation Between Bank of America and Central Japan
Can any of the company-specific risk be diversified away by investing in both Bank of America and Central Japan 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 Central Japan 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 Central Japan Railway, you can compare the effects of market volatilities on Bank of America and Central Japan 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 Central Japan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Central Japan.
Diversification Opportunities for Bank of America and Central Japan
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Central is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Central Japan Railway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Japan Railway 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 Central Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Japan Railway has no effect on the direction of Bank of America i.e., Bank of America and Central Japan go up and down completely randomly.
Pair Corralation between Bank of America and Central Japan
Considering the 90-day investment horizon Bank of America is expected to generate 2.68 times less return on investment than Central Japan. But when comparing it to its historical volatility, Bank of America is 4.03 times less risky than Central Japan. It trades about 0.06 of its potential returns per unit of risk. Central Japan Railway is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 927.00 in Central Japan Railway on September 3, 2024 and sell it today you would earn a total of 1,038 from holding Central Japan Railway or generate 111.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Bank of America vs. Central Japan Railway
Performance |
| Timeline |
| Bank of America |
| Central Japan Railway |
Bank of America and Central Japan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Central Japan
The main advantage of trading using opposite Bank of America and Central Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Central Japan 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 Central Japan will offset losses from the drop in Central Japan'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 |
| Central Japan vs. Superior Plus Corp | Central Japan vs. NMI Holdings | Central Japan vs. Origin Agritech | Central Japan vs. SIVERS SEMICONDUCTORS 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 CEOs Directory module to screen CEOs from public companies around the world.
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