Correlation Between Bank of America and Newport Exploration
Can any of the company-specific risk be diversified away by investing in both Bank of America and Newport Exploration 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 Newport Exploration 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 Newport Exploration, you can compare the effects of market volatilities on Bank of America and Newport Exploration 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 Newport Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Newport Exploration.
Diversification Opportunities for Bank of America and Newport Exploration
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Newport is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Newport Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newport Exploration 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 Newport Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newport Exploration has no effect on the direction of Bank of America i.e., Bank of America and Newport Exploration go up and down completely randomly.
Pair Corralation between Bank of America and Newport Exploration
Assuming the 90 days trading horizon Bank of America is expected to generate 0.3 times more return on investment than Newport Exploration. However, Bank of America is 3.29 times less risky than Newport Exploration. It trades about 0.23 of its potential returns per unit of risk. Newport Exploration is currently generating about -0.15 per unit of risk. If you would invest 2,062 in Bank of America on August 25, 2024 and sell it today you would earn a total of 388.00 from holding Bank of America or generate 18.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Newport Exploration
Performance |
| Timeline |
| Bank of America |
| Newport Exploration |
Bank of America and Newport Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Newport Exploration
The main advantage of trading using opposite Bank of America and Newport Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Newport Exploration 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 Newport Exploration will offset losses from the drop in Newport Exploration'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 |
| Newport Exploration vs. McChip Resources | Newport Exploration vs. Highway 50 Gold | Newport Exploration vs. ProAm Explorations Corp |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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