Correlation Between Bank of America and Advent Wireless
Can any of the company-specific risk be diversified away by investing in both Bank of America and Advent Wireless 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 Advent Wireless 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 Advent Wireless, you can compare the effects of market volatilities on Bank of America and Advent Wireless 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 Advent Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Advent Wireless.
Diversification Opportunities for Bank of America and Advent Wireless
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Advent is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless 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 Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of Bank of America i.e., Bank of America and Advent Wireless go up and down completely randomly.
Pair Corralation between Bank of America and Advent Wireless
Assuming the 90 days trading horizon Bank of America is expected to generate 2.13 times less return on investment than Advent Wireless. But when comparing it to its historical volatility, Bank of America is 2.98 times less risky than Advent Wireless. It trades about 0.31 of its potential returns per unit of risk. Advent Wireless is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 65.00 in Advent Wireless on September 2, 2024 and sell it today you would earn a total of 18.00 from holding Advent Wireless or generate 27.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. Advent Wireless
Performance |
| Timeline |
| Bank of America |
| Advent Wireless |
Bank of America and Advent Wireless Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Advent Wireless
The main advantage of trading using opposite Bank of America and Advent Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Advent Wireless 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 Advent Wireless will offset losses from the drop in Advent Wireless' long position.| Bank of America vs. Birchtech Corp | Bank of America vs. US Financial 15 | Bank of America vs. Enerev5 Metals | Bank of America vs. North American Financial |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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