Correlation Between Bank of America and PLASTIC INDUSTRY
Can any of the company-specific risk be diversified away by investing in both Bank of America and PLASTIC INDUSTRY 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 PLASTIC INDUSTRY 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 PLASTIC INDUSTRY LTD, you can compare the effects of market volatilities on Bank of America and PLASTIC INDUSTRY 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 PLASTIC INDUSTRY. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and PLASTIC INDUSTRY.
Diversification Opportunities for Bank of America and PLASTIC INDUSTRY
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and PLASTIC is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and PLASTIC INDUSTRY LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PLASTIC INDUSTRY LTD 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 PLASTIC INDUSTRY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PLASTIC INDUSTRY LTD has no effect on the direction of Bank of America i.e., Bank of America and PLASTIC INDUSTRY go up and down completely randomly.
Pair Corralation between Bank of America and PLASTIC INDUSTRY
Considering the 90-day investment horizon Bank of America is expected to generate 1.23 times more return on investment than PLASTIC INDUSTRY. However, Bank of America is 1.23 times more volatile than PLASTIC INDUSTRY LTD. It trades about 0.32 of its potential returns per unit of risk. PLASTIC INDUSTRY LTD is currently generating about 0.12 per unit of risk. If you would invest 4,176 in Bank of America on September 2, 2024 and sell it today you would earn a total of 575.00 from holding Bank of America or generate 13.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. PLASTIC INDUSTRY LTD
Performance |
| Timeline |
| Bank of America |
| PLASTIC INDUSTRY LTD |
Bank of America and PLASTIC INDUSTRY Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and PLASTIC INDUSTRY
The main advantage of trading using opposite Bank of America and PLASTIC INDUSTRY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, PLASTIC INDUSTRY 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 PLASTIC INDUSTRY will offset losses from the drop in PLASTIC INDUSTRY'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 |
| PLASTIC INDUSTRY vs. FINCORP INVESTMENT LTD | PLASTIC INDUSTRY vs. MCB GROUP LTD | PLASTIC INDUSTRY vs. CAUDAN DEVELOPMENT LTD | PLASTIC INDUSTRY vs. NEW MAURITIUS HOTELS |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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