Correlation Between Bank of America and Union Petrochemical
Can any of the company-specific risk be diversified away by investing in both Bank of America and Union Petrochemical 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 Union Petrochemical 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 Union Petrochemical Public, you can compare the effects of market volatilities on Bank of America and Union Petrochemical 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 Union Petrochemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Union Petrochemical.
Diversification Opportunities for Bank of America and Union Petrochemical
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Union is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Union Petrochemical Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Petrochemical 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 Union Petrochemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Petrochemical has no effect on the direction of Bank of America i.e., Bank of America and Union Petrochemical go up and down completely randomly.
Pair Corralation between Bank of America and Union Petrochemical
Considering the 90-day investment horizon Bank of America is expected to generate 20.53 times less return on investment than Union Petrochemical. But when comparing it to its historical volatility, Bank of America is 29.27 times less risky than Union Petrochemical. It trades about 0.05 of its potential returns per unit of risk. Union Petrochemical Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 143.00 in Union Petrochemical Public on November 21, 2024 and sell it today you would lose (88.00) from holding Union Petrochemical Public or give up 61.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.76% |
| Values | Daily Returns |
Bank of America vs. Union Petrochemical Public
Performance |
| Timeline |
| Bank of America |
| Union Petrochemical |
Bank of America and Union Petrochemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Union Petrochemical
The main advantage of trading using opposite Bank of America and Union Petrochemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Union Petrochemical 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 Union Petrochemical will offset losses from the drop in Union Petrochemical'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 |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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