Correlation Between Bank of America and Treasury Wine
Can any of the company-specific risk be diversified away by investing in both Bank of America and Treasury Wine 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 Treasury Wine 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 Treasury Wine Estates, you can compare the effects of market volatilities on Bank of America and Treasury Wine 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 Treasury Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Treasury Wine.
Diversification Opportunities for Bank of America and Treasury Wine
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Treasury is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Treasury Wine Estates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treasury Wine Estates 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 Treasury Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treasury Wine Estates has no effect on the direction of Bank of America i.e., Bank of America and Treasury Wine go up and down completely randomly.
Pair Corralation between Bank of America and Treasury Wine
Considering the 90-day investment horizon Bank of America is expected to generate 0.87 times more return on investment than Treasury Wine. However, Bank of America is 1.15 times less risky than Treasury Wine. It trades about 0.05 of its potential returns per unit of risk. Treasury Wine Estates is currently generating about -0.02 per unit of risk. If you would invest 3,278 in Bank of America on August 24, 2024 and sell it today you would earn a total of 1,422 from holding Bank of America or generate 43.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Bank of America vs. Treasury Wine Estates
Performance |
| Timeline |
| Bank of America |
| Treasury Wine Estates |
Bank of America and Treasury Wine Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Treasury Wine
The main advantage of trading using opposite Bank of America and Treasury Wine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Treasury Wine 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 Treasury Wine will offset losses from the drop in Treasury Wine's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Treasury Wine vs. Diageo PLC ADR | Treasury Wine vs. Pernod Ricard SA | Treasury Wine vs. Remy Cointreau SA | Treasury Wine vs. MGP Ingredients |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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