Correlation Between Bank of America and Prairie Provident
Can any of the company-specific risk be diversified away by investing in both Bank of America and Prairie Provident 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 Prairie Provident 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 Prairie Provident Resources, you can compare the effects of market volatilities on Bank of America and Prairie Provident 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 Prairie Provident. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Prairie Provident.
Diversification Opportunities for Bank of America and Prairie Provident
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and Prairie is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Prairie Provident Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prairie Provident 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 Prairie Provident. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prairie Provident has no effect on the direction of Bank of America i.e., Bank of America and Prairie Provident go up and down completely randomly.
Pair Corralation between Bank of America and Prairie Provident
Assuming the 90 days trading horizon Bank of America is expected to generate 10.83 times less return on investment than Prairie Provident. But when comparing it to its historical volatility, Bank of America is 7.82 times less risky than Prairie Provident. It trades about 0.3 of its potential returns per unit of risk. Prairie Provident Resources is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 3.00 in Prairie Provident Resources on October 24, 2024 and sell it today you would earn a total of 2.50 from holding Prairie Provident Resources or generate 83.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Prairie Provident Resources
Performance |
| Timeline |
| Bank of America |
| Prairie Provident |
Bank of America and Prairie Provident Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Prairie Provident
The main advantage of trading using opposite Bank of America and Prairie Provident positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Prairie Provident 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 Prairie Provident will offset losses from the drop in Prairie Provident's long position.| Bank of America vs. Cogeco Communications | Bank of America vs. Royal Bank of | Bank of America vs. Queens Road Capital | Bank of America vs. Gatos Silver |
| Prairie Provident vs. Pine Cliff Energy | Prairie Provident vs. InPlay Oil Corp | Prairie Provident vs. Journey Energy |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |