Correlation Between Bank of America and Diamond Estates
Can any of the company-specific risk be diversified away by investing in both Bank of America and Diamond Estates 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 Diamond Estates 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 Diamond Estates Wines, you can compare the effects of market volatilities on Bank of America and Diamond Estates 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 Diamond Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Diamond Estates.
Diversification Opportunities for Bank of America and Diamond Estates
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Diamond is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Diamond Estates Wines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Estates Wines 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 Diamond Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Estates Wines has no effect on the direction of Bank of America i.e., Bank of America and Diamond Estates go up and down completely randomly.
Pair Corralation between Bank of America and Diamond Estates
Assuming the 90 days trading horizon Bank of America is expected to generate 0.35 times more return on investment than Diamond Estates. However, Bank of America is 2.88 times less risky than Diamond Estates. It trades about 0.17 of its potential returns per unit of risk. Diamond Estates Wines is currently generating about -0.04 per unit of risk. If you would invest 2,014 in Bank of America on September 12, 2024 and sell it today you would earn a total of 368.00 from holding Bank of America or generate 18.27% 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. Diamond Estates Wines
Performance |
| Timeline |
| Bank of America |
| Diamond Estates Wines |
Bank of America and Diamond Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Diamond Estates
The main advantage of trading using opposite Bank of America and Diamond Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Diamond Estates 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 Diamond Estates will offset losses from the drop in Diamond Estates' long position.| Bank of America vs. Quorum Information Technologies | Bank of America vs. Forsys Metals Corp | Bank of America vs. Rogers Communications | Bank of America vs. Getty Copper |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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