Correlation Between Bank of America and Chatham Rock
Can any of the company-specific risk be diversified away by investing in both Bank of America and Chatham Rock 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 Chatham Rock 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 Chatham Rock Phosphate, you can compare the effects of market volatilities on Bank of America and Chatham Rock 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 Chatham Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Chatham Rock.
Diversification Opportunities for Bank of America and Chatham Rock
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Chatham is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Chatham Rock Phosphate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Rock Phosphate 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 Chatham Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Rock Phosphate has no effect on the direction of Bank of America i.e., Bank of America and Chatham Rock go up and down completely randomly.
Pair Corralation between Bank of America and Chatham Rock
Assuming the 90 days trading horizon Bank of America is expected to generate 0.23 times more return on investment than Chatham Rock. However, Bank of America is 4.41 times less risky than Chatham Rock. It trades about 0.25 of its potential returns per unit of risk. Chatham Rock Phosphate is currently generating about 0.04 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 Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. Chatham Rock Phosphate
Performance |
| Timeline |
| Bank of America |
| Chatham Rock Phosphate |
Bank of America and Chatham Rock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Chatham Rock
The main advantage of trading using opposite Bank of America and Chatham Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Chatham Rock 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 Chatham Rock will offset losses from the drop in Chatham Rock'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 |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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