Correlation Between Bank of America and Tungsten Mining
Can any of the company-specific risk be diversified away by investing in both Bank of America and Tungsten Mining 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 Tungsten Mining 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 Tungsten Mining NL, you can compare the effects of market volatilities on Bank of America and Tungsten Mining 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 Tungsten Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Tungsten Mining.
Diversification Opportunities for Bank of America and Tungsten Mining
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Tungsten is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Tungsten Mining NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tungsten Mining NL 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 Tungsten Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tungsten Mining NL has no effect on the direction of Bank of America i.e., Bank of America and Tungsten Mining go up and down completely randomly.
Pair Corralation between Bank of America and Tungsten Mining
Considering the 90-day investment horizon Bank of America is expected to generate 3.64 times less return on investment than Tungsten Mining. But when comparing it to its historical volatility, Bank of America is 4.69 times less risky than Tungsten Mining. It trades about 0.29 of its potential returns per unit of risk. Tungsten Mining NL is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5.40 in Tungsten Mining NL on August 31, 2024 and sell it today you would earn a total of 2.60 from holding Tungsten Mining NL or generate 48.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. Tungsten Mining NL
Performance |
| Timeline |
| Bank of America |
| Tungsten Mining NL |
Bank of America and Tungsten Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Tungsten Mining
The main advantage of trading using opposite Bank of America and Tungsten Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Tungsten Mining 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 Tungsten Mining will offset losses from the drop in Tungsten Mining's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Tungsten Mining vs. Hawsons Iron | Tungsten Mining vs. The Environmental Group | Tungsten Mining vs. Vulcan Steel | Tungsten Mining vs. Olivers Real Food |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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