Correlation Between Bank of America and Telus Corp
Can any of the company-specific risk be diversified away by investing in both Bank of America and Telus Corp 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 Telus Corp 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 Telus Corp, you can compare the effects of market volatilities on Bank of America and Telus Corp 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 Telus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Telus Corp.
Diversification Opportunities for Bank of America and Telus Corp
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Telus is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Telus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telus Corp 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 Telus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telus Corp has no effect on the direction of Bank of America i.e., Bank of America and Telus Corp go up and down completely randomly.
Pair Corralation between Bank of America and Telus Corp
Considering the 90-day investment horizon Bank of America is expected to generate 7.65 times less return on investment than Telus Corp. But when comparing it to its historical volatility, Bank of America is 1.32 times less risky than Telus Corp. It trades about 0.05 of its potential returns per unit of risk. Telus Corp is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 2,014 in Telus Corp on November 18, 2024 and sell it today you would earn a total of 166.00 from holding Telus Corp or generate 8.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. Telus Corp
Performance |
| Timeline |
| Bank of America |
| Telus Corp |
Bank of America and Telus Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Telus Corp
The main advantage of trading using opposite Bank of America and Telus Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Telus Corp 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 Telus Corp will offset losses from the drop in Telus Corp's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| Telus Corp vs. BCE Inc | Telus Corp vs. Fortis Inc | Telus Corp vs. Enbridge | Telus Corp vs. Toronto Dominion Bank |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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