Correlation Between Bank of America and Norse Atlantic
Can any of the company-specific risk be diversified away by investing in both Bank of America and Norse Atlantic 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 Norse Atlantic 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 Norse Atlantic ASA, you can compare the effects of market volatilities on Bank of America and Norse Atlantic 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 Norse Atlantic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Norse Atlantic.
Diversification Opportunities for Bank of America and Norse Atlantic
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Norse is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Norse Atlantic ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Norse Atlantic ASA 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 Norse Atlantic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Norse Atlantic ASA has no effect on the direction of Bank of America i.e., Bank of America and Norse Atlantic go up and down completely randomly.
Pair Corralation between Bank of America and Norse Atlantic
Considering the 90-day investment horizon Bank of America is expected to generate 8.95 times less return on investment than Norse Atlantic. But when comparing it to its historical volatility, Bank of America is 6.58 times less risky than Norse Atlantic. It trades about 0.27 of its potential returns per unit of risk. Norse Atlantic ASA is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 16.00 in Norse Atlantic ASA on August 31, 2024 and sell it today you would earn a total of 18.00 from holding Norse Atlantic ASA or generate 112.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 82.61% |
| Values | Daily Returns |
Bank of America vs. Norse Atlantic ASA
Performance |
| Timeline |
| Bank of America |
| Norse Atlantic ASA |
Bank of America and Norse Atlantic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Norse Atlantic
The main advantage of trading using opposite Bank of America and Norse Atlantic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Norse Atlantic 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 Norse Atlantic will offset losses from the drop in Norse Atlantic'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 |
| Norse Atlantic vs. Finnair Oyj | Norse Atlantic vs. easyJet plc | Norse Atlantic vs. Air New Zealand | Norse Atlantic vs. Air China Limited |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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