Correlation Between Bank of America and Dorel Industries
Can any of the company-specific risk be diversified away by investing in both Bank of America and Dorel Industries 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 Dorel Industries 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 Dorel Industries, you can compare the effects of market volatilities on Bank of America and Dorel Industries 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 Dorel Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Dorel Industries.
Diversification Opportunities for Bank of America and Dorel Industries
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Dorel is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Dorel Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorel Industries 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 Dorel Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorel Industries has no effect on the direction of Bank of America i.e., Bank of America and Dorel Industries go up and down completely randomly.
Pair Corralation between Bank of America and Dorel Industries
Assuming the 90 days trading horizon Bank of America is expected to generate 0.68 times more return on investment than Dorel Industries. However, Bank of America is 1.48 times less risky than Dorel Industries. It trades about 0.1 of its potential returns per unit of risk. Dorel Industries is currently generating about -0.15 per unit of risk. If you would invest 2,066 in Bank of America on August 31, 2024 and sell it today you would earn a total of 422.00 from holding Bank of America or generate 20.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Dorel Industries
Performance |
| Timeline |
| Bank of America |
| Dorel Industries |
Bank of America and Dorel Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Dorel Industries
The main advantage of trading using opposite Bank of America and Dorel Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Dorel Industries 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 Dorel Industries will offset losses from the drop in Dorel Industries' long position.| Bank of America vs. Highwood Asset Management | Bank of America vs. Precision Drilling | Bank of America vs. Metalero Mining Corp | Bank of America vs. Brookfield Office Properties |
| Dorel Industries vs. Berkshire Hathaway CDR | Dorel Industries vs. JPMorgan Chase Co | Dorel Industries vs. Bank of America | Dorel Industries vs. Alphabet Inc CDR |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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