Correlation Between Bank of America and Kneat
Can any of the company-specific risk be diversified away by investing in both Bank of America and Kneat 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 Kneat 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 Kneat Inc, you can compare the effects of market volatilities on Bank of America and Kneat 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 Kneat. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Kneat.
Diversification Opportunities for Bank of America and Kneat
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Kneat is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Kneat Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kneat Inc 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 Kneat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kneat Inc has no effect on the direction of Bank of America i.e., Bank of America and Kneat go up and down completely randomly.
Pair Corralation between Bank of America and Kneat
Assuming the 90 days trading horizon Bank of America is expected to generate 1.41 times more return on investment than Kneat. However, Bank of America is 1.41 times more volatile than Kneat Inc. It trades about 0.26 of its potential returns per unit of risk. Kneat Inc is currently generating about 0.33 per unit of risk. If you would invest 2,219 in Bank of America on August 28, 2024 and sell it today you would earn a total of 256.00 from holding Bank of America or generate 11.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Kneat Inc
Performance |
| Timeline |
| Bank of America |
| Kneat Inc |
Bank of America and Kneat Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Kneat
The main advantage of trading using opposite Bank of America and Kneat positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Kneat 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 Kneat will offset losses from the drop in Kneat's long position.| Bank of America vs. DelphX Capital Markets | Bank of America vs. Citadel Income | Bank of America vs. iShares Canadian HYBrid | Bank of America vs. Altagas Cum Red |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |