Correlation Between Bank of America and Woolworths
Can any of the company-specific risk be diversified away by investing in both Bank of America and Woolworths 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 Woolworths 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 Woolworths, you can compare the effects of market volatilities on Bank of America and Woolworths 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 Woolworths. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Woolworths.
Diversification Opportunities for Bank of America and Woolworths
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Woolworths is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Woolworths in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths 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 Woolworths. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths has no effect on the direction of Bank of America i.e., Bank of America and Woolworths go up and down completely randomly.
Pair Corralation between Bank of America and Woolworths
Considering the 90-day investment horizon Bank of America is expected to generate 1.36 times more return on investment than Woolworths. However, Bank of America is 1.36 times more volatile than Woolworths. It trades about 0.13 of its potential returns per unit of risk. Woolworths is currently generating about -0.05 per unit of risk. If you would invest 3,007 in Bank of America on September 2, 2024 and sell it today you would earn a total of 1,744 from holding Bank of America or generate 58.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Bank of America vs. Woolworths
Performance |
| Timeline |
| Bank of America |
| Woolworths |
Bank of America and Woolworths Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Woolworths
The main advantage of trading using opposite Bank of America and Woolworths positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Woolworths 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 Woolworths will offset losses from the drop in Woolworths' long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Woolworths vs. Skycity Entertainment Group | Woolworths vs. Charter Hall Retail | Woolworths vs. oOhMedia | Woolworths vs. Phoslock Environmental Technologies |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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