Correlation Between Bank of America and Nordic Iron
Can any of the company-specific risk be diversified away by investing in both Bank of America and Nordic Iron 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 Nordic Iron 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 Nordic Iron Ore, you can compare the effects of market volatilities on Bank of America and Nordic Iron 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 Nordic Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Nordic Iron.
Diversification Opportunities for Bank of America and Nordic Iron
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Nordic is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Nordic Iron Ore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nordic Iron Ore 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 Nordic Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nordic Iron Ore has no effect on the direction of Bank of America i.e., Bank of America and Nordic Iron go up and down completely randomly.
Pair Corralation between Bank of America and Nordic Iron
Considering the 90-day investment horizon Bank of America is expected to generate 1.4 times less return on investment than Nordic Iron. But when comparing it to its historical volatility, Bank of America is 2.44 times less risky than Nordic Iron. It trades about 0.26 of its potential returns per unit of risk. Nordic Iron Ore is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 396.00 in Nordic Iron Ore on August 30, 2024 and sell it today you would earn a total of 104.00 from holding Nordic Iron Ore or generate 26.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Nordic Iron Ore
Performance |
| Timeline |
| Bank of America |
| Nordic Iron Ore |
Bank of America and Nordic Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Nordic Iron
The main advantage of trading using opposite Bank of America and Nordic Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Nordic Iron 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 Nordic Iron will offset losses from the drop in Nordic Iron's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
| Nordic Iron vs. Leading Edge Materials | Nordic Iron vs. Alzinova AB | Nordic Iron vs. SaltX Technology Holding | Nordic Iron vs. KABE Group 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |