Correlation Between Bank of America and ProAm Explorations
Can any of the company-specific risk be diversified away by investing in both Bank of America and ProAm Explorations 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 ProAm Explorations 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 ProAm Explorations Corp, you can compare the effects of market volatilities on Bank of America and ProAm Explorations 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 ProAm Explorations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and ProAm Explorations.
Diversification Opportunities for Bank of America and ProAm Explorations
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and ProAm is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ProAm Explorations Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProAm Explorations Corp 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 ProAm Explorations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProAm Explorations Corp has no effect on the direction of Bank of America i.e., Bank of America and ProAm Explorations go up and down completely randomly.
Pair Corralation between Bank of America and ProAm Explorations
Considering the 90-day investment horizon Bank of America is expected to generate 11.61 times less return on investment than ProAm Explorations. But when comparing it to its historical volatility, Bank of America is 10.8 times less risky than ProAm Explorations. It trades about 0.06 of its potential returns per unit of risk. ProAm Explorations Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4.00 in ProAm Explorations Corp on September 2, 2024 and sell it today you would earn a total of 1.00 from holding ProAm Explorations Corp or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. ProAm Explorations Corp
Performance |
| Timeline |
| Bank of America |
| ProAm Explorations Corp |
Bank of America and ProAm Explorations Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and ProAm Explorations
The main advantage of trading using opposite Bank of America and ProAm Explorations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, ProAm Explorations 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 ProAm Explorations will offset losses from the drop in ProAm Explorations' 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 |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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