Correlation Between Bank of America and Software Circle
Can any of the company-specific risk be diversified away by investing in both Bank of America and Software Circle 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 Software Circle 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 Software Circle plc, you can compare the effects of market volatilities on Bank of America and Software Circle 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 Software Circle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Software Circle.
Diversification Opportunities for Bank of America and Software Circle
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Software is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Software Circle plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Software Circle plc 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 Software Circle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Software Circle plc has no effect on the direction of Bank of America i.e., Bank of America and Software Circle go up and down completely randomly.
Pair Corralation between Bank of America and Software Circle
Considering the 90-day investment horizon Bank of America is expected to generate 1.25 times less return on investment than Software Circle. In addition to that, Bank of America is 1.17 times more volatile than Software Circle plc. It trades about 0.14 of its total potential returns per unit of risk. Software Circle plc is currently generating about 0.2 per unit of volatility. If you would invest 2,340 in Software Circle plc on November 4, 2024 and sell it today you would earn a total of 110.00 from holding Software Circle plc or generate 4.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Bank of America vs. Software Circle plc
Performance |
| Timeline |
| Bank of America |
| Software Circle plc |
Bank of America and Software Circle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Software Circle
The main advantage of trading using opposite Bank of America and Software Circle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Software Circle 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 Software Circle will offset losses from the drop in Software Circle's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Royal Bank of | Bank of America vs. Canadian Imperial Bank |
| Software Circle vs. Indutrade AB | Software Circle vs. Litigation Capital Management | Software Circle vs. Vietnam Enterprise Investments | Software Circle vs. Lowland Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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