Correlation Between Bank of America and Champion Iron
Can any of the company-specific risk be diversified away by investing in both Bank of America and Champion Iron 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 Champion Iron 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 Champion Iron, you can compare the effects of market volatilities on Bank of America and Champion Iron 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 Champion Iron. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Champion Iron.
Diversification Opportunities for Bank of America and Champion Iron
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Champion is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Champion Iron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champion Iron 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 Champion Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champion Iron has no effect on the direction of Bank of America i.e., Bank of America and Champion Iron go up and down completely randomly.
Pair Corralation between Bank of America and Champion Iron
Assuming the 90 days trading horizon Bank of America is expected to generate 0.77 times more return on investment than Champion Iron. However, Bank of America is 1.29 times less risky than Champion Iron. It trades about 0.25 of its potential returns per unit of risk. Champion Iron is currently generating about -0.13 per unit of risk. If you would invest 2,219 in Bank of America on August 29, 2024 and sell it today you would earn a total of 265.00 from holding Bank of America or generate 11.94% 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. Champion Iron
Performance |
| Timeline |
| Bank of America |
| Champion Iron |
Bank of America and Champion Iron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Champion Iron
The main advantage of trading using opposite Bank of America and Champion Iron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Champion Iron 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 Champion Iron will offset losses from the drop in Champion Iron's long position.| Bank of America vs. Microsoft Corp CDR | Bank of America vs. Apple Inc CDR | Bank of America vs. Alphabet Inc CDR | Bank of America vs. Amazon CDR |
| Champion Iron vs. Black Iron | Champion Iron vs. Wesdome Gold Mines | Champion Iron vs. GoGold Resources | Champion Iron vs. Mason Graphite |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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