Correlation Between Bank of America and Komatsu
Can any of the company-specific risk be diversified away by investing in both Bank of America and Komatsu 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 Komatsu 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 Komatsu, you can compare the effects of market volatilities on Bank of America and Komatsu 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 Komatsu. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Komatsu.
Diversification Opportunities for Bank of America and Komatsu
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and Komatsu is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Komatsu in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Komatsu 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 Komatsu. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Komatsu has no effect on the direction of Bank of America i.e., Bank of America and Komatsu go up and down completely randomly.
Pair Corralation between Bank of America and Komatsu
Considering the 90-day investment horizon Bank of America is expected to generate 1.29 times less return on investment than Komatsu. But when comparing it to its historical volatility, Bank of America is 2.05 times less risky than Komatsu. It trades about 0.06 of its potential returns per unit of risk. Komatsu is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,951 in Komatsu on August 31, 2024 and sell it today you would earn a total of 733.00 from holding Komatsu or generate 37.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.07% |
| Values | Daily Returns |
Bank of America vs. Komatsu
Performance |
| Timeline |
| Bank of America |
| Komatsu |
Bank of America and Komatsu Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Komatsu
The main advantage of trading using opposite Bank of America and Komatsu positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Komatsu 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 Komatsu will offset losses from the drop in Komatsu'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 |
| Komatsu vs. American Premium Water | Komatsu vs. AmeraMex International | Komatsu vs. Arts Way Manufacturing Co | Komatsu vs. Astec Industries |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |