Correlation Between Bank of America and Marathon Oil
Can any of the company-specific risk be diversified away by investing in both Bank of America and Marathon Oil 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 Marathon Oil 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 Marathon Oil, you can compare the effects of market volatilities on Bank of America and Marathon Oil 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 Marathon Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Marathon Oil.
Diversification Opportunities for Bank of America and Marathon Oil
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Marathon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Marathon Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Oil 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 Marathon Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Oil has no effect on the direction of Bank of America i.e., Bank of America and Marathon Oil go up and down completely randomly.
Pair Corralation between Bank of America and Marathon Oil
Assuming the 90 days trading horizon Bank of America is expected to generate 1.01 times less return on investment than Marathon Oil. In addition to that, Bank of America is 1.06 times more volatile than Marathon Oil. It trades about 0.33 of its total potential returns per unit of risk. Marathon Oil is currently generating about 0.36 per unit of volatility. If you would invest 14,985 in Marathon Oil on August 26, 2024 and sell it today you would earn a total of 2,030 from holding Marathon Oil or generate 13.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Bank of America vs. Marathon Oil
Performance |
| Timeline |
| Bank of America |
| Marathon Oil |
Bank of America and Marathon Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Marathon Oil
The main advantage of trading using opposite Bank of America and Marathon Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Marathon Oil 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 Marathon Oil will offset losses from the drop in Marathon Oil's long position.| Bank of America vs. METISA Metalrgica Timboense | Bank of America vs. salesforce inc | Bank of America vs. Hospital Mater Dei | Bank of America vs. Marfrig Global Foods |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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