Correlation Between Bank of America and Power Metals
Can any of the company-specific risk be diversified away by investing in both Bank of America and Power Metals 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 Power Metals 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 Power Metals Corp, you can compare the effects of market volatilities on Bank of America and Power Metals 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 Power Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Power Metals.
Diversification Opportunities for Bank of America and Power Metals
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Power is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Power Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Metals 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 Power Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Metals Corp has no effect on the direction of Bank of America i.e., Bank of America and Power Metals go up and down completely randomly.
Pair Corralation between Bank of America and Power Metals
Considering the 90-day investment horizon Bank of America is expected to generate 1.99 times less return on investment than Power Metals. But when comparing it to its historical volatility, Bank of America is 3.46 times less risky than Power Metals. It trades about 0.11 of its potential returns per unit of risk. Power Metals Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 20.00 in Power Metals Corp on November 5, 2024 and sell it today you would earn a total of 12.00 from holding Power Metals Corp or generate 60.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Power Metals Corp
Performance |
| Timeline |
| Bank of America |
| Power Metals Corp |
Bank of America and Power Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Power Metals
The main advantage of trading using opposite Bank of America and Power Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Power Metals 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 Power Metals will offset losses from the drop in Power Metals' long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Royal Bank of | Bank of America vs. Canadian Imperial Bank |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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