Correlation Between Bank of America and Source Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and Source Energy 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 Source Energy 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 Source Energy Services, you can compare the effects of market volatilities on Bank of America and Source Energy 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 Source Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Source Energy.
Diversification Opportunities for Bank of America and Source Energy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Source is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Source Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source Energy Services 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 Source Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source Energy Services has no effect on the direction of Bank of America i.e., Bank of America and Source Energy go up and down completely randomly.
Pair Corralation between Bank of America and Source Energy
Considering the 90-day investment horizon Bank of America is expected to generate 2.32 times less return on investment than Source Energy. But when comparing it to its historical volatility, Bank of America is 2.16 times less risky than Source Energy. It trades about 0.1 of its potential returns per unit of risk. Source Energy Services is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 867.00 in Source Energy Services on August 31, 2024 and sell it today you would earn a total of 426.00 from holding Source Energy Services or generate 49.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Bank of America vs. Source Energy Services
Performance |
| Timeline |
| Bank of America |
| Source Energy Services |
Bank of America and Source Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Source Energy
The main advantage of trading using opposite Bank of America and Source Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Source Energy 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 Source Energy will offset losses from the drop in Source Energy's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Source Energy vs. Petroleo Brasileiro Petrobras | Source Energy vs. Equinor ASA ADR | Source Energy vs. Eni SpA ADR | Source Energy vs. YPF Sociedad Anonima |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |