Correlation Between Bank of America and OSX Brasil
Can any of the company-specific risk be diversified away by investing in both Bank of America and OSX Brasil 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 OSX Brasil 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 OSX Brasil SA, you can compare the effects of market volatilities on Bank of America and OSX Brasil 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 OSX Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and OSX Brasil.
Diversification Opportunities for Bank of America and OSX Brasil
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and OSX is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and OSX Brasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSX Brasil SA 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 OSX Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSX Brasil SA has no effect on the direction of Bank of America i.e., Bank of America and OSX Brasil go up and down completely randomly.
Pair Corralation between Bank of America and OSX Brasil
Assuming the 90 days trading horizon Bank of America is expected to generate 0.35 times more return on investment than OSX Brasil. However, Bank of America is 2.84 times less risky than OSX Brasil. It trades about 0.24 of its potential returns per unit of risk. OSX Brasil SA is currently generating about -0.43 per unit of risk. If you would invest 6,608 in Bank of America on September 13, 2024 and sell it today you would earn a total of 337.00 from holding Bank of America or generate 5.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. OSX Brasil SA
Performance |
| Timeline |
| Bank of America |
| OSX Brasil SA |
Bank of America and OSX Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and OSX Brasil
The main advantage of trading using opposite Bank of America and OSX Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, OSX Brasil 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 OSX Brasil will offset losses from the drop in OSX Brasil's long position.| Bank of America vs. Warner Music Group | Bank of America vs. Mitsubishi UFJ Financial | Bank of America vs. American Airlines Group | Bank of America vs. Deutsche Bank Aktiengesellschaft |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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