Correlation Between Bank of America and Postmedia Network
Can any of the company-specific risk be diversified away by investing in both Bank of America and Postmedia Network 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 Postmedia Network 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 Postmedia Network Canada, you can compare the effects of market volatilities on Bank of America and Postmedia Network 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 Postmedia Network. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Postmedia Network.
Diversification Opportunities for Bank of America and Postmedia Network
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Postmedia is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Postmedia Network Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postmedia Network Canada 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 Postmedia Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postmedia Network Canada has no effect on the direction of Bank of America i.e., Bank of America and Postmedia Network go up and down completely randomly.
Pair Corralation between Bank of America and Postmedia Network
Assuming the 90 days trading horizon Bank of America is expected to generate 0.86 times more return on investment than Postmedia Network. However, Bank of America is 1.16 times less risky than Postmedia Network. It trades about 0.17 of its potential returns per unit of risk. Postmedia Network Canada is currently generating about -0.2 per unit of risk. If you would invest 2,108 in Bank of America on September 2, 2024 and sell it today you would earn a total of 380.00 from holding Bank of America or generate 18.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Postmedia Network Canada
Performance |
| Timeline |
| Bank of America |
| Postmedia Network Canada |
Bank of America and Postmedia Network Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Postmedia Network
The main advantage of trading using opposite Bank of America and Postmedia Network positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Postmedia Network 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 Postmedia Network will offset losses from the drop in Postmedia Network's long position.| Bank of America vs. Birchtech Corp | Bank of America vs. US Financial 15 | Bank of America vs. Enerev5 Metals | Bank of America vs. North American Financial |
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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