Correlation Between Bank of America and Russel Metals
Can any of the company-specific risk be diversified away by investing in both Bank of America and Russel Metals 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 Russel Metals 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 Russel Metals, you can compare the effects of market volatilities on Bank of America and Russel Metals 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 Russel Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Russel Metals.
Diversification Opportunities for Bank of America and Russel Metals
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Russel is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Russel Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russel Metals 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 Russel Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russel Metals has no effect on the direction of Bank of America i.e., Bank of America and Russel Metals go up and down completely randomly.
Pair Corralation between Bank of America and Russel Metals
Assuming the 90 days trading horizon Bank of America is expected to generate 1.04 times less return on investment than Russel Metals. But when comparing it to its historical volatility, Bank of America is 1.01 times less risky than Russel Metals. It trades about 0.26 of its potential returns per unit of risk. Russel Metals is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,980 in Russel Metals on August 29, 2024 and sell it today you would earn a total of 496.00 from holding Russel Metals or generate 12.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Russel Metals
Performance |
| Timeline |
| Bank of America |
| Russel Metals |
Bank of America and Russel Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Russel Metals
The main advantage of trading using opposite Bank of America and Russel Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Russel Metals 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 Russel Metals will offset losses from the drop in Russel Metals' 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 |
| Russel Metals vs. ATS P | Russel Metals vs. Richelieu Hardware | Russel Metals vs. West Fraser Timber | Russel Metals vs. Brookfield |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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