Correlation Between Bank of America and THC Biomed
Can any of the company-specific risk be diversified away by investing in both Bank of America and THC Biomed 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 THC Biomed 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 THC Biomed Intl, you can compare the effects of market volatilities on Bank of America and THC Biomed 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 THC Biomed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and THC Biomed.
Diversification Opportunities for Bank of America and THC Biomed
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and THC is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and THC Biomed Intl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on THC Biomed Intl 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 THC Biomed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of THC Biomed Intl has no effect on the direction of Bank of America i.e., Bank of America and THC Biomed go up and down completely randomly.
Pair Corralation between Bank of America and THC Biomed
Considering the 90-day investment horizon Bank of America is expected to generate 20.11 times less return on investment than THC Biomed. But when comparing it to its historical volatility, Bank of America is 22.52 times less risky than THC Biomed. It trades about 0.13 of its potential returns per unit of risk. THC Biomed Intl is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1.90 in THC Biomed Intl on August 25, 2024 and sell it today you would lose (1.80) from holding THC Biomed Intl or give up 94.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. THC Biomed Intl
Performance |
| Timeline |
| Bank of America |
| THC Biomed Intl |
Bank of America and THC Biomed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and THC Biomed
The main advantage of trading using opposite Bank of America and THC Biomed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, THC Biomed 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 THC Biomed will offset losses from the drop in THC Biomed's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| THC Biomed vs. Rezolute | THC Biomed vs. Tempest Therapeutics | THC Biomed vs. Forte Biosciences | THC Biomed vs. Dyadic International |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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