Correlation Between Bank of America and TAL Education
Can any of the company-specific risk be diversified away by investing in both Bank of America and TAL Education 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 TAL Education 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 TAL Education Group, you can compare the effects of market volatilities on Bank of America and TAL Education 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 TAL Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and TAL Education.
Diversification Opportunities for Bank of America and TAL Education
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and TAL is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and TAL Education Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TAL Education Group 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 TAL Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TAL Education Group has no effect on the direction of Bank of America i.e., Bank of America and TAL Education go up and down completely randomly.
Pair Corralation between Bank of America and TAL Education
Assuming the 90 days trading horizon Bank of America is expected to under-perform the TAL Education. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 2.5 times less risky than TAL Education. The stock trades about -0.36 of its potential returns per unit of risk. The TAL Education Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 703.00 in TAL Education Group on November 28, 2024 and sell it today you would earn a total of 84.00 from holding TAL Education Group or generate 11.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. TAL Education Group
Performance |
| Timeline |
| Bank of America |
| TAL Education Group |
Bank of America and TAL Education Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and TAL Education
The main advantage of trading using opposite Bank of America and TAL Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, TAL Education 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 TAL Education will offset losses from the drop in TAL Education's long position.| Bank of America vs. Applied Materials, | Bank of America vs. Cognizant Technology Solutions | Bank of America vs. Chunghwa Telecom Co, | Bank of America vs. DENTSPLY SIRONA |
| TAL Education vs. Spotify Technology SA | TAL Education vs. GX AI TECH | TAL Education vs. Hormel Foods | TAL Education vs. Uber Technologies |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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