Correlation Between Bank of America and PJX Resources
Can any of the company-specific risk be diversified away by investing in both Bank of America and PJX Resources 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 PJX Resources 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 PJX Resources, you can compare the effects of market volatilities on Bank of America and PJX Resources 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 PJX Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and PJX Resources.
Diversification Opportunities for Bank of America and PJX Resources
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and PJX is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and PJX Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PJX Resources 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 PJX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PJX Resources has no effect on the direction of Bank of America i.e., Bank of America and PJX Resources go up and down completely randomly.
Pair Corralation between Bank of America and PJX Resources
Assuming the 90 days trading horizon Bank of America is expected to generate 0.25 times more return on investment than PJX Resources. However, Bank of America is 3.95 times less risky than PJX Resources. It trades about 0.25 of its potential returns per unit of risk. PJX Resources is currently generating about -0.09 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 265.00 from holding Bank of America or generate 11.94% 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. PJX Resources
Performance |
| Timeline |
| Bank of America |
| PJX Resources |
Bank of America and PJX Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and PJX Resources
The main advantage of trading using opposite Bank of America and PJX Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, PJX Resources 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 PJX Resources will offset losses from the drop in PJX Resources' long position.| Bank of America vs. Microsoft Corp CDR | Bank of America vs. Apple Inc CDR | Bank of America vs. Alphabet Inc CDR | Bank of America vs. Amazon CDR |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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