Correlation Between Bank of America and Haivision Systems

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Can any of the company-specific risk be diversified away by investing in both Bank of America and Haivision Systems 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 Haivision Systems 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 Haivision Systems, you can compare the effects of market volatilities on Bank of America and Haivision Systems 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 Haivision Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Haivision Systems.

Diversification Opportunities for Bank of America and Haivision Systems

-0.29
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and Haivision is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Haivision Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haivision Systems 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 Haivision Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haivision Systems has no effect on the direction of Bank of America i.e., Bank of America and Haivision Systems go up and down completely randomly.

Pair Corralation between Bank of America and Haivision Systems

Assuming the 90 days trading horizon Bank of America is expected to generate 0.76 times more return on investment than Haivision Systems. However, Bank of America is 1.32 times less risky than Haivision Systems. It trades about 0.26 of its potential returns per unit of risk. Haivision Systems is currently generating about 0.0 per unit of risk. If you would invest  2,219  in Bank of America on August 29, 2024 and sell it today you would earn a total of  269.00  from holding Bank of America or generate 12.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bank of America  vs.  Haivision Systems

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.
Haivision Systems 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Haivision Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Bank of America and Haivision Systems Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and Haivision Systems

The main advantage of trading using opposite Bank of America and Haivision Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Haivision Systems 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 Haivision Systems will offset losses from the drop in Haivision Systems' long position.
The idea behind Bank of America and Haivision Systems pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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