Correlation Between Bank of America and Canadian Utilities
Can any of the company-specific risk be diversified away by investing in both Bank of America and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Limited, you can compare the effects of market volatilities on Bank of America and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Canadian Utilities.
Diversification Opportunities for Bank of America and Canadian Utilities
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Canadian is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Bank of America i.e., Bank of America and Canadian Utilities go up and down completely randomly.
Pair Corralation between Bank of America and Canadian Utilities
Assuming the 90 days trading horizon Bank of America is expected to generate 1.43 times more return on investment than Canadian Utilities. However, Bank of America is 1.43 times more volatile than Canadian Utilities Limited. It trades about 0.22 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about -0.17 per unit of risk. If you would invest 2,303 in Bank of America on November 2, 2024 and sell it today you would earn a total of 123.00 from holding Bank of America or generate 5.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Canadian Utilities Limited
Performance |
| Timeline |
| Bank of America |
| Canadian Utilities |
Bank of America and Canadian Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Canadian Utilities
The main advantage of trading using opposite Bank of America and Canadian Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Canadian Utilities 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 Canadian Utilities will offset losses from the drop in Canadian Utilities' long position.| Bank of America vs. Tree Island Steel | Bank of America vs. Altair Resources | Bank of America vs. Arizona Gold Silver | Bank of America vs. Blackrock Silver Corp |
| Canadian Utilities vs. Fortis Inc | Canadian Utilities vs. Emera Inc | Canadian Utilities vs. Algonquin Power Utilities | Canadian Utilities vs. ATCO |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Equity Valuation Check real value of public entities based on technical and fundamental data |