Correlation Between Bank of America and ODIN Investments
Can any of the company-specific risk be diversified away by investing in both Bank of America and ODIN Investments 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 ODIN Investments 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 ODIN Investments, you can compare the effects of market volatilities on Bank of America and ODIN Investments 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 ODIN Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and ODIN Investments.
Diversification Opportunities for Bank of America and ODIN Investments
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and ODIN is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ODIN Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ODIN Investments 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 ODIN Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ODIN Investments has no effect on the direction of Bank of America i.e., Bank of America and ODIN Investments go up and down completely randomly.
Pair Corralation between Bank of America and ODIN Investments
Considering the 90-day investment horizon Bank of America is expected to generate 0.68 times more return on investment than ODIN Investments. However, Bank of America is 1.47 times less risky than ODIN Investments. It trades about 0.29 of its potential returns per unit of risk. ODIN Investments is currently generating about -0.09 per unit of risk. If you would invest 4,231 in Bank of America on August 31, 2024 and sell it today you would earn a total of 546.00 from holding Bank of America or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 81.82% |
| Values | Daily Returns |
Bank of America vs. ODIN Investments
Performance |
| Timeline |
| Bank of America |
| ODIN Investments |
Bank of America and ODIN Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and ODIN Investments
The main advantage of trading using opposite Bank of America and ODIN Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, ODIN Investments 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 ODIN Investments will offset losses from the drop in ODIN Investments' 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 |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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