Correlation Between CVW CleanTech and Bank of America
Can any of the company-specific risk be diversified away by investing in both CVW CleanTech and Bank of America 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 CVW CleanTech and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVW CleanTech and Bank of America, you can compare the effects of market volatilities on CVW CleanTech and Bank of America 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 CVW CleanTech with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVW CleanTech and Bank of America.
Diversification Opportunities for CVW CleanTech and Bank of America
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CVW and Bank is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding CVW CleanTech and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and CVW CleanTech 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 CVW CleanTech are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of CVW CleanTech i.e., CVW CleanTech and Bank of America go up and down completely randomly.
Pair Corralation between CVW CleanTech and Bank of America
Assuming the 90 days horizon CVW CleanTech is expected to generate 2.87 times more return on investment than Bank of America. However, CVW CleanTech is 2.87 times more volatile than Bank of America. It trades about 0.02 of its potential returns per unit of risk. Bank of America is currently generating about 0.04 per unit of risk. If you would invest 95.00 in CVW CleanTech on October 25, 2024 and sell it today you would lose (10.00) from holding CVW CleanTech or give up 10.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CVW CleanTech vs. Bank of America
Performance |
| Timeline |
| CVW CleanTech |
| Bank of America |
CVW CleanTech and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CVW CleanTech and Bank of America
The main advantage of trading using opposite CVW CleanTech and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVW CleanTech position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.The idea behind CVW CleanTech and Bank of America pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Bank of America vs. Forsys Metals Corp | Bank of America vs. Dream Office Real | Bank of America vs. Verizon Communications CDR | Bank of America vs. Advent Wireless |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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