Correlation Between Bank of America and Maxim Power
Can any of the company-specific risk be diversified away by investing in both Bank of America and Maxim Power 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 Maxim Power 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 Maxim Power Corp, you can compare the effects of market volatilities on Bank of America and Maxim Power 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 Maxim Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Maxim Power.
Diversification Opportunities for Bank of America and Maxim Power
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Maxim is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp 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 Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Bank of America i.e., Bank of America and Maxim Power go up and down completely randomly.
Pair Corralation between Bank of America and Maxim Power
Assuming the 90 days trading horizon Bank of America is expected to generate 1.82 times less return on investment than Maxim Power. But when comparing it to its historical volatility, Bank of America is 1.65 times less risky than Maxim Power. It trades about 0.18 of its potential returns per unit of risk. Maxim Power Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 354.00 in Maxim Power Corp on August 28, 2024 and sell it today you would earn a total of 131.00 from holding Maxim Power Corp or generate 37.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Maxim Power Corp
Performance |
| Timeline |
| Bank of America |
| Maxim Power Corp |
Bank of America and Maxim Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Maxim Power
The main advantage of trading using opposite Bank of America and Maxim Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Maxim Power 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 Maxim Power will offset losses from the drop in Maxim Power'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 |
| Maxim Power vs. Caldwell Partners International | Maxim Power vs. Chesswood Group Limited | Maxim Power vs. Mccoy Global | Maxim Power vs. Pulse Seismic |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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