Correlation Between Bank of America and Theratechnologies
Can any of the company-specific risk be diversified away by investing in both Bank of America and Theratechnologies 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 Theratechnologies 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 Theratechnologies, you can compare the effects of market volatilities on Bank of America and Theratechnologies 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 Theratechnologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Theratechnologies.
Diversification Opportunities for Bank of America and Theratechnologies
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Theratechnologies is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Theratechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theratechnologies 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 Theratechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theratechnologies has no effect on the direction of Bank of America i.e., Bank of America and Theratechnologies go up and down completely randomly.
Pair Corralation between Bank of America and Theratechnologies
Assuming the 90 days trading horizon Bank of America is expected to generate 0.28 times more return on investment than Theratechnologies. However, Bank of America is 3.6 times less risky than Theratechnologies. It trades about 0.04 of its potential returns per unit of risk. Theratechnologies is currently generating about 0.0 per unit of risk. If you would invest 1,791 in Bank of America on September 19, 2024 and sell it today you would earn a total of 551.00 from holding Bank of America or generate 30.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Bank of America vs. Theratechnologies
Performance |
| Timeline |
| Bank of America |
| Theratechnologies |
Bank of America and Theratechnologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Theratechnologies
The main advantage of trading using opposite Bank of America and Theratechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Theratechnologies 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 Theratechnologies will offset losses from the drop in Theratechnologies' long position.| Bank of America vs. Metalero Mining Corp | Bank of America vs. Information Services | Bank of America vs. Globex Mining Enterprises | Bank of America vs. Data Communications Management |
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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