Correlation Between Bank of America and Twilio
Can any of the company-specific risk be diversified away by investing in both Bank of America and Twilio 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 Twilio 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 Twilio Inc, you can compare the effects of market volatilities on Bank of America and Twilio 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 Twilio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Twilio.
Diversification Opportunities for Bank of America and Twilio
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Twilio is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Twilio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twilio Inc 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 Twilio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twilio Inc has no effect on the direction of Bank of America i.e., Bank of America and Twilio go up and down completely randomly.
Pair Corralation between Bank of America and Twilio
Assuming the 90 days trading horizon Bank of America is expected to generate 0.64 times more return on investment than Twilio. However, Bank of America is 1.56 times less risky than Twilio. It trades about 0.24 of its potential returns per unit of risk. Twilio Inc is currently generating about 0.14 per unit of risk. If you would invest 6,645 in Bank of America on October 20, 2024 and sell it today you would earn a total of 426.00 from holding Bank of America or generate 6.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Bank of America vs. Twilio Inc
Performance |
| Timeline |
| Bank of America |
| Twilio Inc |
Bank of America and Twilio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Twilio
The main advantage of trading using opposite Bank of America and Twilio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Twilio 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 Twilio will offset losses from the drop in Twilio's long position.| Bank of America vs. Ryanair Holdings plc | Bank of America vs. The Trade Desk | Bank of America vs. Tyson Foods | Bank of America vs. Patria Investments Limited |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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