Correlation Between Bank of America and Western Bulk
Can any of the company-specific risk be diversified away by investing in both Bank of America and Western Bulk 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 Western Bulk 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 Western Bulk Chartering, you can compare the effects of market volatilities on Bank of America and Western Bulk 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 Western Bulk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Western Bulk.
Diversification Opportunities for Bank of America and Western Bulk
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Western is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Western Bulk Chartering in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Bulk Chartering 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 Western Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Bulk Chartering has no effect on the direction of Bank of America i.e., Bank of America and Western Bulk go up and down completely randomly.
Pair Corralation between Bank of America and Western Bulk
Considering the 90-day investment horizon Bank of America is expected to generate 1.03 times less return on investment than Western Bulk. But when comparing it to its historical volatility, Bank of America is 5.99 times less risky than Western Bulk. It trades about 0.06 of its potential returns per unit of risk. Western Bulk Chartering is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 337.00 in Western Bulk Chartering on August 30, 2024 and sell it today you would lose (186.00) from holding Western Bulk Chartering or give up 55.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Western Bulk Chartering
Performance |
| Timeline |
| Bank of America |
| Western Bulk Chartering |
Bank of America and Western Bulk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Western Bulk
The main advantage of trading using opposite Bank of America and Western Bulk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Western Bulk 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 Western Bulk will offset losses from the drop in Western Bulk's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings |
| Western Bulk vs. SITC International Holdings | Western Bulk vs. Pacific Basin Shipping | Western Bulk vs. SITC International Holdings | Western Bulk vs. Mitsui OSK Lines |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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