Correlation Between Bank of America and Forward Water
Can any of the company-specific risk be diversified away by investing in both Bank of America and Forward Water 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 Forward Water 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 Forward Water Technologies, you can compare the effects of market volatilities on Bank of America and Forward Water 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 Forward Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Forward Water.
Diversification Opportunities for Bank of America and Forward Water
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Forward is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Forward Water Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forward Water Techno 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 Forward Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forward Water Techno has no effect on the direction of Bank of America i.e., Bank of America and Forward Water go up and down completely randomly.
Pair Corralation between Bank of America and Forward Water
Assuming the 90 days trading horizon Bank of America is expected to generate 3.04 times less return on investment than Forward Water. But when comparing it to its historical volatility, Bank of America is 10.77 times less risky than Forward Water. It trades about 0.12 of its potential returns per unit of risk. Forward Water Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 40.00 in Forward Water Technologies on September 14, 2024 and sell it today you would lose (32.00) from holding Forward Water Technologies or give up 80.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.63% |
| Values | Daily Returns |
Bank of America vs. Forward Water Technologies
Performance |
| Timeline |
| Bank of America |
| Forward Water Techno |
Bank of America and Forward Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Forward Water
The main advantage of trading using opposite Bank of America and Forward Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Forward Water 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 Forward Water will offset losses from the drop in Forward Water's long position.| Bank of America vs. CNJ Capital Investments | Bank of America vs. Bird Construction | Bank of America vs. Cogeco Communications | Bank of America vs. Brookfield Office Properties |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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