Correlation Between Bank of America and Rose Hill
Can any of the company-specific risk be diversified away by investing in both Bank of America and Rose Hill 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 Rose Hill 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 Rose Hill Acquisition, you can compare the effects of market volatilities on Bank of America and Rose Hill 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 Rose Hill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Rose Hill.
Diversification Opportunities for Bank of America and Rose Hill
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Rose is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Rose Hill Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rose Hill Acquisition 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 Rose Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rose Hill Acquisition has no effect on the direction of Bank of America i.e., Bank of America and Rose Hill go up and down completely randomly.
Pair Corralation between Bank of America and Rose Hill
Considering the 90-day investment horizon Bank of America is expected to generate 37.54 times less return on investment than Rose Hill. But when comparing it to its historical volatility, Bank of America is 23.22 times less risky than Rose Hill. It trades about 0.06 of its potential returns per unit of risk. Rose Hill Acquisition is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 8.01 in Rose Hill Acquisition on August 30, 2024 and sell it today you would lose (4.63) from holding Rose Hill Acquisition or give up 57.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 27.88% |
| Values | Daily Returns |
Bank of America vs. Rose Hill Acquisition
Performance |
| Timeline |
| Bank of America |
| Rose Hill Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank of America and Rose Hill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Rose Hill
The main advantage of trading using opposite Bank of America and Rose Hill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Rose Hill 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 Rose Hill will offset losses from the drop in Rose Hill'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. JPMorgan Chase Co |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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