Correlation Between Bank of America and Seagate Technology
Can any of the company-specific risk be diversified away by investing in both Bank of America and Seagate Technology 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 Seagate Technology 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 Seagate Technology Holdings, you can compare the effects of market volatilities on Bank of America and Seagate Technology 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 Seagate Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Seagate Technology.
Diversification Opportunities for Bank of America and Seagate Technology
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Seagate is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Seagate Technology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seagate Technology 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 Seagate Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seagate Technology has no effect on the direction of Bank of America i.e., Bank of America and Seagate Technology go up and down completely randomly.
Pair Corralation between Bank of America and Seagate Technology
Assuming the 90 days trading horizon Bank of America is expected to under-perform the Seagate Technology. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.97 times less risky than Seagate Technology. The stock trades about -0.11 of its potential returns per unit of risk. The Seagate Technology Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 55,740 in Seagate Technology Holdings on November 5, 2024 and sell it today you would earn a total of 4,589 from holding Seagate Technology Holdings or generate 8.23% 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. Seagate Technology Holdings
Performance |
| Timeline |
| Bank of America |
| Seagate Technology |
Bank of America and Seagate Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Seagate Technology
The main advantage of trading using opposite Bank of America and Seagate Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Seagate Technology 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 Seagate Technology will offset losses from the drop in Seagate Technology's long position.| Bank of America vs. Fresenius Medical Care | Bank of America vs. JB Hunt Transport | Bank of America vs. Broadridge Financial Solutions, | Bank of America vs. Hormel Foods |
| Seagate Technology vs. Arista Networks | Seagate Technology vs. Dell Technologies | Seagate Technology vs. Western Digital | Seagate Technology vs. Positivo Tecnologia SA |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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