Correlation Between Bank of America and Predictive Discovery
Can any of the company-specific risk be diversified away by investing in both Bank of America and Predictive Discovery 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 Predictive Discovery 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 Predictive Discovery, you can compare the effects of market volatilities on Bank of America and Predictive Discovery 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 Predictive Discovery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Predictive Discovery.
Diversification Opportunities for Bank of America and Predictive Discovery
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Predictive is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Predictive Discovery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Predictive Discovery 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 Predictive Discovery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Predictive Discovery has no effect on the direction of Bank of America i.e., Bank of America and Predictive Discovery go up and down completely randomly.
Pair Corralation between Bank of America and Predictive Discovery
Considering the 90-day investment horizon Bank of America is expected to generate 1.25 times less return on investment than Predictive Discovery. But when comparing it to its historical volatility, Bank of America is 2.73 times less risky than Predictive Discovery. It trades about 0.06 of its potential returns per unit of risk. Predictive Discovery is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Predictive Discovery on August 30, 2024 and sell it today you would earn a total of 4.00 from holding Predictive Discovery or generate 19.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Bank of America vs. Predictive Discovery
Performance |
| Timeline |
| Bank of America |
| Predictive Discovery |
Bank of America and Predictive Discovery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Predictive Discovery
The main advantage of trading using opposite Bank of America and Predictive Discovery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Predictive Discovery 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 Predictive Discovery will offset losses from the drop in Predictive Discovery'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 |
| Predictive Discovery vs. Northern Star Resources | Predictive Discovery vs. Evolution Mining | Predictive Discovery vs. Bluescope Steel | Predictive Discovery vs. Sandfire Resources NL |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |