Correlation Between Bank of America and Golden Arrow
Can any of the company-specific risk be diversified away by investing in both Bank of America and Golden Arrow 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 Golden Arrow 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 Golden Arrow Resources, you can compare the effects of market volatilities on Bank of America and Golden Arrow 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 Golden Arrow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Golden Arrow.
Diversification Opportunities for Bank of America and Golden Arrow
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Golden is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Golden Arrow Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Arrow Resources 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 Golden Arrow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Arrow Resources has no effect on the direction of Bank of America i.e., Bank of America and Golden Arrow go up and down completely randomly.
Pair Corralation between Bank of America and Golden Arrow
Assuming the 90 days trading horizon Bank of America is expected to generate 0.25 times more return on investment than Golden Arrow. However, Bank of America is 4.08 times less risky than Golden Arrow. It trades about 0.3 of its potential returns per unit of risk. Golden Arrow Resources is currently generating about -0.02 per unit of risk. If you would invest 2,153 in Bank of America on September 3, 2024 and sell it today you would earn a total of 293.00 from holding Bank of America or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Golden Arrow Resources
Performance |
| Timeline |
| Bank of America |
| Golden Arrow Resources |
Bank of America and Golden Arrow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Golden Arrow
The main advantage of trading using opposite Bank of America and Golden Arrow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Golden Arrow 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 Golden Arrow will offset losses from the drop in Golden Arrow's long position.| Bank of America vs. Diamond Estates Wines | Bank of America vs. Perseus Mining | Bank of America vs. Ramp Metals | Bank of America vs. HPQ Silicon Resources |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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