Correlation Between Bank of America and Secure Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and Secure Energy 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 Secure Energy 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 Secure Energy Services, you can compare the effects of market volatilities on Bank of America and Secure Energy 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 Secure Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Secure Energy.
Diversification Opportunities for Bank of America and Secure Energy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Secure is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Secure Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Secure Energy Services 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 Secure Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Secure Energy Services has no effect on the direction of Bank of America i.e., Bank of America and Secure Energy go up and down completely randomly.
Pair Corralation between Bank of America and Secure Energy
Assuming the 90 days trading horizon Bank of America is expected to generate 1.79 times more return on investment than Secure Energy. However, Bank of America is 1.79 times more volatile than Secure Energy Services. It trades about 0.31 of its potential returns per unit of risk. Secure Energy Services is currently generating about -0.01 per unit of risk. If you would invest 2,181 in Bank of America on September 2, 2024 and sell it today you would earn a total of 307.00 from holding Bank of America or generate 14.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Secure Energy Services
Performance |
| Timeline |
| Bank of America |
| Secure Energy Services |
Bank of America and Secure Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Secure Energy
The main advantage of trading using opposite Bank of America and Secure Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Secure Energy 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 Secure Energy will offset losses from the drop in Secure Energy'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 |
| Secure Energy vs. Environmental Waste International | Secure Energy vs. BluMetric Environmental | Secure Energy vs. Clear Blue Technologies | Secure Energy vs. Eguana Technologies |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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