Correlation Between Bank of America and JTL Industries

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Can any of the company-specific risk be diversified away by investing in both Bank of America and JTL Industries 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 JTL Industries 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 JTL Industries, you can compare the effects of market volatilities on Bank of America and JTL Industries 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 JTL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and JTL Industries.

Diversification Opportunities for Bank of America and JTL Industries

-0.9
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Bank and JTL is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and JTL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JTL Industries 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 JTL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JTL Industries has no effect on the direction of Bank of America i.e., Bank of America and JTL Industries go up and down completely randomly.

Pair Corralation between Bank of America and JTL Industries

Considering the 90-day investment horizon Bank of America is expected to generate 0.17 times more return on investment than JTL Industries. However, Bank of America is 5.8 times less risky than JTL Industries. It trades about 0.27 of its potential returns per unit of risk. JTL Industries is currently generating about -0.19 per unit of risk. If you would invest  4,262  in Bank of America on August 29, 2024 and sell it today you would earn a total of  513.00  from holding Bank of America or generate 12.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Bank of America  vs.  JTL Industries

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.
JTL Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days JTL Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Bank of America and JTL Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and JTL Industries

The main advantage of trading using opposite Bank of America and JTL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, JTL Industries 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 JTL Industries will offset losses from the drop in JTL Industries' long position.
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The idea behind Bank of America and JTL Industries pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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