Correlation Between Bank of America and Signify NV

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Can any of the company-specific risk be diversified away by investing in both Bank of America and Signify 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 Signify 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 Signify NV, you can compare the effects of market volatilities on Bank of America and Signify 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 Signify NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Signify NV.

Diversification Opportunities for Bank of America and Signify NV

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Bank and Signify is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Signify NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signify 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 Signify NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signify NV has no effect on the direction of Bank of America i.e., Bank of America and Signify NV go up and down completely randomly.

Pair Corralation between Bank of America and Signify NV

Considering the 90-day investment horizon Bank of America is expected to generate 0.93 times more return on investment than Signify NV. However, Bank of America is 1.07 times less risky than Signify NV. It trades about 0.21 of its potential returns per unit of risk. Signify NV is currently generating about -0.27 per unit of risk. If you would invest  4,455  in Bank of America on October 26, 2024 and sell it today you would earn a total of  226.00  from holding Bank of America or generate 5.07% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bank of America  vs.  Signify NV

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in February 2025.
Signify NV 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Signify NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Bank of America and Signify NV Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and Signify NV

The main advantage of trading using opposite Bank of America and Signify NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Signify 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 Signify NV will offset losses from the drop in Signify NV's long position.
The idea behind Bank of America and Signify NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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