Correlation Between Bank of America and REPUBLIC

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Can any of the company-specific risk be diversified away by investing in both Bank of America and REPUBLIC 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 REPUBLIC 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 REPUBLIC SVCS INC, you can compare the effects of market volatilities on Bank of America and REPUBLIC 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 REPUBLIC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and REPUBLIC.

Diversification Opportunities for Bank of America and REPUBLIC

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and REPUBLIC is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and REPUBLIC SVCS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REPUBLIC SVCS INC 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 REPUBLIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REPUBLIC SVCS INC has no effect on the direction of Bank of America i.e., Bank of America and REPUBLIC go up and down completely randomly.

Pair Corralation between Bank of America and REPUBLIC

Considering the 90-day investment horizon Bank of America is expected to generate 8.9 times more return on investment than REPUBLIC. However, Bank of America is 8.9 times more volatile than REPUBLIC SVCS INC. It trades about 0.06 of its potential returns per unit of risk. REPUBLIC SVCS INC is currently generating about 0.05 per unit of risk. If you would invest  3,265  in Bank of America on November 9, 2024 and sell it today you would earn a total of  1,509  from holding Bank of America or generate 46.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy94.93%
ValuesDaily Returns

Bank of America  vs.  REPUBLIC SVCS INC

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Bank of America is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
REPUBLIC SVCS INC 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in REPUBLIC SVCS INC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, REPUBLIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bank of America and REPUBLIC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and REPUBLIC

The main advantage of trading using opposite Bank of America and REPUBLIC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, REPUBLIC 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 REPUBLIC will offset losses from the drop in REPUBLIC's long position.
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The idea behind Bank of America and REPUBLIC SVCS INC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.

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