Correlation Between Bank of America and Red Moon
Can any of the company-specific risk be diversified away by investing in both Bank of America and Red Moon 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 Red Moon 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 Red Moon Resources, you can compare the effects of market volatilities on Bank of America and Red Moon 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 Red Moon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Red Moon.
Diversification Opportunities for Bank of America and Red Moon
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Red is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Red Moon Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Moon Resources 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 Red Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Moon Resources has no effect on the direction of Bank of America i.e., Bank of America and Red Moon go up and down completely randomly.
Pair Corralation between Bank of America and Red Moon
Considering the 90-day investment horizon Bank of America is expected to under-perform the Red Moon. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 3.54 times less risky than Red Moon. The stock trades about -0.37 of its potential returns per unit of risk. The Red Moon Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 44.00 in Red Moon Resources on November 27, 2024 and sell it today you would earn a total of 0.00 from holding Red Moon Resources or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Bank of America vs. Red Moon Resources
Performance |
| Timeline |
| Bank of America |
| Red Moon Resources |
Bank of America and Red Moon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Red Moon
The main advantage of trading using opposite Bank of America and Red Moon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Red Moon 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 Red Moon will offset losses from the drop in Red Moon'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. Royal Bank of |
| Red Moon vs. Aurwest Resources | Red Moon vs. Benton Resources | Red Moon vs. Pan Global Resources | Red Moon vs. Tower Resources |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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