Correlation Between Bank of America and New Sources
Can any of the company-specific risk be diversified away by investing in both Bank of America and New Sources 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 New Sources 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 New Sources Energy, you can compare the effects of market volatilities on Bank of America and New Sources 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 New Sources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and New Sources.
Diversification Opportunities for Bank of America and New Sources
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and New is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and New Sources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Sources Energy 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 New Sources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Sources Energy has no effect on the direction of Bank of America i.e., Bank of America and New Sources go up and down completely randomly.
Pair Corralation between Bank of America and New Sources
Considering the 90-day investment horizon Bank of America is expected to generate 0.35 times more return on investment than New Sources. However, Bank of America is 2.84 times less risky than New Sources. It trades about 0.16 of its potential returns per unit of risk. New Sources Energy is currently generating about 0.02 per unit of risk. If you would invest 4,044 in Bank of America on September 2, 2024 and sell it today you would earn a total of 707.00 from holding Bank of America or generate 17.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.97% |
| Values | Daily Returns |
Bank of America vs. New Sources Energy
Performance |
| Timeline |
| Bank of America |
| New Sources Energy |
Bank of America and New Sources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and New Sources
The main advantage of trading using opposite Bank of America and New Sources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, New Sources 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 New Sources will offset losses from the drop in New Sources' 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 |
| New Sources vs. NedSense Enterprises NV | New Sources vs. Ctac NV | New Sources vs. Lavide Holding NV | New Sources vs. iShares SP 500 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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