Correlation Between Bank of America and SandRidge Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and SandRidge 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 SandRidge 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 SandRidge Energy, you can compare the effects of market volatilities on Bank of America and SandRidge 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 SandRidge Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SandRidge Energy.
Diversification Opportunities for Bank of America and SandRidge Energy
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and SandRidge is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SandRidge Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SandRidge Energy 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 SandRidge Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SandRidge Energy has no effect on the direction of Bank of America i.e., Bank of America and SandRidge Energy go up and down completely randomly.
Pair Corralation between Bank of America and SandRidge Energy
Considering the 90-day investment horizon Bank of America is expected to generate 1.09 times more return on investment than SandRidge Energy. However, Bank of America is 1.09 times more volatile than SandRidge Energy. It trades about 0.24 of its potential returns per unit of risk. SandRidge Energy is currently generating about 0.24 per unit of risk. If you would invest 4,262 in Bank of America on August 27, 2024 and sell it today you would earn a total of 438.00 from holding Bank of America or generate 10.28% 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. SandRidge Energy
Performance |
| Timeline |
| Bank of America |
| SandRidge Energy |
Bank of America and SandRidge Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SandRidge Energy
The main advantage of trading using opposite Bank of America and SandRidge Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SandRidge 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 SandRidge Energy will offset losses from the drop in SandRidge Energy'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 |
| SandRidge Energy vs. Range Resources Corp | SandRidge Energy vs. SM Energy Co | SandRidge Energy vs. Northern Oil Gas |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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