Correlation Between Bank of America and Stone Ridge
Can any of the company-specific risk be diversified away by investing in both Bank of America and Stone Ridge 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 Stone Ridge 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 Stone Ridge 2052, you can compare the effects of market volatilities on Bank of America and Stone Ridge 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 Stone Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Stone Ridge.
Diversification Opportunities for Bank of America and Stone Ridge
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Stone is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Stone Ridge 2052 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stone Ridge 2052 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 Stone Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stone Ridge 2052 has no effect on the direction of Bank of America i.e., Bank of America and Stone Ridge go up and down completely randomly.
Pair Corralation between Bank of America and Stone Ridge
Considering the 90-day investment horizon Bank of America is expected to generate 3.47 times more return on investment than Stone Ridge. However, Bank of America is 3.47 times more volatile than Stone Ridge 2052. It trades about 0.13 of its potential returns per unit of risk. Stone Ridge 2052 is currently generating about -0.23 per unit of risk. If you would invest 2,949 in Bank of America on August 25, 2024 and sell it today you would earn a total of 1,751 from holding Bank of America or generate 59.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 20.4% |
| Values | Daily Returns |
Bank of America vs. Stone Ridge 2052
Performance |
| Timeline |
| Bank of America |
| Stone Ridge 2052 |
Bank of America and Stone Ridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Stone Ridge
The main advantage of trading using opposite Bank of America and Stone Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Stone Ridge 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 Stone Ridge will offset losses from the drop in Stone Ridge's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Stone Ridge vs. Simplify Volatility Premium | Stone Ridge vs. Sprott Focus Trust | Stone Ridge vs. iShares Trust | Stone Ridge vs. iShares Trust |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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