Correlation Between Bank of America and Niagara Mohawk
Can any of the company-specific risk be diversified away by investing in both Bank of America and Niagara Mohawk 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 Niagara Mohawk 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 Niagara Mohawk Power, you can compare the effects of market volatilities on Bank of America and Niagara Mohawk 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 Niagara Mohawk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Niagara Mohawk.
Diversification Opportunities for Bank of America and Niagara Mohawk
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Niagara is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Niagara Mohawk Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niagara Mohawk Power 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 Niagara Mohawk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niagara Mohawk Power has no effect on the direction of Bank of America i.e., Bank of America and Niagara Mohawk go up and down completely randomly.
Pair Corralation between Bank of America and Niagara Mohawk
Considering the 90-day investment horizon Bank of America is expected to generate 3.16 times more return on investment than Niagara Mohawk. However, Bank of America is 3.16 times more volatile than Niagara Mohawk Power. It trades about 0.31 of its potential returns per unit of risk. Niagara Mohawk Power is currently generating about -0.24 per unit of risk. If you would invest 4,182 in Bank of America on September 1, 2024 and sell it today you would earn a total of 569.00 from holding Bank of America or generate 13.61% 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. Niagara Mohawk Power
Performance |
| Timeline |
| Bank of America |
| Niagara Mohawk Power |
Bank of America and Niagara Mohawk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Niagara Mohawk
The main advantage of trading using opposite Bank of America and Niagara Mohawk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Niagara Mohawk 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 Niagara Mohawk will offset losses from the drop in Niagara Mohawk's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Niagara Mohawk vs. Asure Software | Niagara Mohawk vs. Skechers USA | Niagara Mohawk vs. Under Armour C | Niagara Mohawk vs. Western Digital |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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