Correlation Between Bank of America and Watts Water
Can any of the company-specific risk be diversified away by investing in both Bank of America and Watts Water 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 Watts Water 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 Watts Water Technologies, you can compare the effects of market volatilities on Bank of America and Watts Water 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 Watts Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Watts Water.
Diversification Opportunities for Bank of America and Watts Water
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Watts is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Watts Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watts Water Technologies 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 Watts Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watts Water Technologies has no effect on the direction of Bank of America i.e., Bank of America and Watts Water go up and down completely randomly.
Pair Corralation between Bank of America and Watts Water
Considering the 90-day investment horizon Bank of America is expected to generate 1.11 times more return on investment than Watts Water. However, Bank of America is 1.11 times more volatile than Watts Water Technologies. It trades about 0.17 of its potential returns per unit of risk. Watts Water Technologies is currently generating about 0.12 per unit of risk. If you would invest 4,044 in Bank of America on August 31, 2024 and sell it today you would earn a total of 733.00 from holding Bank of America or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Watts Water Technologies
Performance |
| Timeline |
| Bank of America |
| Watts Water Technologies |
Bank of America and Watts Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Watts Water
The main advantage of trading using opposite Bank of America and Watts Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Watts Water 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 Watts Water will offset losses from the drop in Watts Water's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Watts Water vs. Standex International | Watts Water vs. Donaldson | Watts Water vs. CSW Industrials | Watts Water vs. Franklin Electric Co |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |