Correlation Between AGRICUL BK and Bank of America Corp
Can any of the company-specific risk be diversified away by investing in both AGRICUL BK and Bank of America Corp 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 AGRICUL BK and Bank of America Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AGRICUL BK CHINA H and Bank of America, you can compare the effects of market volatilities on AGRICUL BK and Bank of America Corp 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 AGRICUL BK with a short position of Bank of America Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGRICUL BK and Bank of America Corp.
Diversification Opportunities for AGRICUL BK and Bank of America Corp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AGRICUL and Bank is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding AGRICUL BK CHINA H and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America Corp and AGRICUL BK 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 AGRICUL BK CHINA H are associated (or correlated) with Bank of America Corp. 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 Corp has no effect on the direction of AGRICUL BK i.e., AGRICUL BK and Bank of America Corp go up and down completely randomly.
Pair Corralation between AGRICUL BK and Bank of America Corp
Assuming the 90 days trading horizon AGRICUL BK is expected to generate 1.81 times less return on investment than Bank of America Corp. In addition to that, AGRICUL BK is 1.44 times more volatile than Bank of America. It trades about 0.08 of its total potential returns per unit of risk. Bank of America is currently generating about 0.21 per unit of volatility. If you would invest 3,583 in Bank of America on August 28, 2024 and sell it today you would earn a total of 951.00 from holding Bank of America or generate 26.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AGRICUL BK CHINA H vs. Bank of America
Performance |
| Timeline |
| AGRICUL BK CHINA |
| Bank of America Corp |
AGRICUL BK and Bank of America Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AGRICUL BK and Bank of America Corp
The main advantage of trading using opposite AGRICUL BK and Bank of America Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGRICUL BK position performs unexpectedly, Bank of America Corp 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 Corp will offset losses from the drop in Bank of America Corp's long position.The idea behind AGRICUL BK CHINA H 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 Corp vs. Singapore Reinsurance | Bank of America Corp vs. Goosehead Insurance | Bank of America Corp vs. HANOVER INSURANCE | Bank of America Corp vs. QBE Insurance Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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