Correlation Between Bank of America and Ferrari NV
Can any of the company-specific risk be diversified away by investing in both Bank of America and Ferrari NV 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 Ferrari NV 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 Ferrari NV, you can compare the effects of market volatilities on Bank of America and Ferrari NV 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 Ferrari NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Ferrari NV.
Diversification Opportunities for Bank of America and Ferrari NV
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Ferrari is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Ferrari NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrari NV 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 Ferrari NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrari NV has no effect on the direction of Bank of America i.e., Bank of America and Ferrari NV go up and down completely randomly.
Pair Corralation between Bank of America and Ferrari NV
Considering the 90-day investment horizon Bank of America is expected to generate 1.02 times more return on investment than Ferrari NV. However, Bank of America is 1.02 times more volatile than Ferrari NV. It trades about 0.26 of its potential returns per unit of risk. Ferrari NV is currently generating about -0.27 per unit of risk. If you would invest 4,262 in Bank of America on August 28, 2024 and sell it today you would earn a total of 488.00 from holding Bank of America or generate 11.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Ferrari NV
Performance |
| Timeline |
| Bank of America |
| Ferrari NV |
Bank of America and Ferrari NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Ferrari NV
The main advantage of trading using opposite Bank of America and Ferrari NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Ferrari NV 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 Ferrari NV will offset losses from the drop in Ferrari NV's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
| Ferrari NV vs. Nio Class A | Ferrari NV vs. Lucid Group | Ferrari NV vs. Tesla Inc | Ferrari NV vs. Mullen Automotive |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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