Correlation Between Bank of America and Sarepta Therapeutics

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

Diversification Opportunities for Bank of America and Sarepta Therapeutics

BankSareptaDiversified AwayBankSareptaDiversified Away100%
-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Bank and Sarepta is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Sarepta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sarepta Therapeutics 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 Sarepta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sarepta Therapeutics has no effect on the direction of Bank of America i.e., Bank of America and Sarepta Therapeutics go up and down completely randomly.

Pair Corralation between Bank of America and Sarepta Therapeutics

Considering the 90-day investment horizon Bank of America is expected to generate 0.47 times more return on investment than Sarepta Therapeutics. However, Bank of America is 2.15 times less risky than Sarepta Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Sarepta Therapeutics is currently generating about -0.01 per unit of risk. If you would invest  3,642  in Bank of America on November 21, 2024 and sell it today you would earn a total of  1,054  from holding Bank of America or generate 28.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bank of America  vs.  Sarepta Therapeutics

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-50510
JavaScript chart by amCharts 3.21.15BAC SRPT
       Timeline  
Bank of America 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bank of America is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb434445464748
Sarepta Therapeutics 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sarepta Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sarepta Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb105110115120125130135

Bank of America and Sarepta Therapeutics Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.53-2.64-1.76-0.87-0.01480.871.782.693.614.52 0.050.100.150.200.250.30
JavaScript chart by amCharts 3.21.15BAC SRPT
       Returns  

Pair Trading with Bank of America and Sarepta Therapeutics

The main advantage of trading using opposite Bank of America and Sarepta Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Sarepta Therapeutics 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 Sarepta Therapeutics will offset losses from the drop in Sarepta Therapeutics' long position.
The idea behind Bank of America and Sarepta Therapeutics 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.

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