Correlation Between Bank of America and MEG Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and MEG Energy 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 MEG Energy 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 MEG Energy Corp, you can compare the effects of market volatilities on Bank of America and MEG Energy 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 MEG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and MEG Energy.
Diversification Opportunities for Bank of America and MEG Energy
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and MEG is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and MEG Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEG Energy Corp 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 MEG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEG Energy Corp has no effect on the direction of Bank of America i.e., Bank of America and MEG Energy go up and down completely randomly.
Pair Corralation between Bank of America and MEG Energy
Considering the 90-day investment horizon Bank of America is expected to generate 1.06 times less return on investment than MEG Energy. But when comparing it to its historical volatility, Bank of America is 1.39 times less risky than MEG Energy. It trades about 0.06 of its potential returns per unit of risk. MEG Energy Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,758 in MEG Energy Corp on August 28, 2024 and sell it today you would earn a total of 844.00 from holding MEG Energy Corp or generate 48.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. MEG Energy Corp
Performance |
| Timeline |
| Bank of America |
| MEG Energy Corp |
Bank of America and MEG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and MEG Energy
The main advantage of trading using opposite Bank of America and MEG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, MEG Energy 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 MEG Energy will offset losses from the drop in MEG Energy's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
| MEG Energy vs. Baytex Energy Corp | MEG Energy vs. Whitecap Resources | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. ARC Resources |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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