Correlation Between Bank of America and Capital Power
Can any of the company-specific risk be diversified away by investing in both Bank of America and Capital Power 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 Capital Power 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 Capital Power, you can compare the effects of market volatilities on Bank of America and Capital Power 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 Capital Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Capital Power.
Diversification Opportunities for Bank of America and Capital Power
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and Capital is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Capital Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Power 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 Capital Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Power has no effect on the direction of Bank of America i.e., Bank of America and Capital Power go up and down completely randomly.
Pair Corralation between Bank of America and Capital Power
Assuming the 90 days trading horizon Bank of America is expected to generate 0.28 times more return on investment than Capital Power. However, Bank of America is 3.58 times less risky than Capital Power. It trades about 0.18 of its potential returns per unit of risk. Capital Power is currently generating about -0.18 per unit of risk. If you would invest 2,303 in Bank of America on November 3, 2024 and sell it today you would earn a total of 102.00 from holding Bank of America or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Capital Power
Performance |
| Timeline |
| Bank of America |
| Capital Power |
Bank of America and Capital Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Capital Power
The main advantage of trading using opposite Bank of America and Capital Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Capital Power 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 Capital Power will offset losses from the drop in Capital Power's long position.| Bank of America vs. Champion Iron | Bank of America vs. BluMetric Environmental | Bank of America vs. Hemisphere Energy | Bank of America vs. Bird Construction |
| Capital Power vs. Canadian Utilities Limited | Capital Power vs. Emera Inc | Capital Power vs. Keyera Corp | Capital Power vs. Northland Power |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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