Correlation Between Economic Investment and Bank of America
Can any of the company-specific risk be diversified away by investing in both Economic Investment 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 Economic Investment 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 Economic Investment Trust and Bank of America, you can compare the effects of market volatilities on Economic Investment 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 Economic Investment with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Economic Investment and Bank of America.
Diversification Opportunities for Economic Investment and Bank of America
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Economic and Bank is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Economic Investment Trust 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 Economic Investment 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 Economic Investment Trust 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 Economic Investment i.e., Economic Investment and Bank of America go up and down completely randomly.
Pair Corralation between Economic Investment and Bank of America
Assuming the 90 days trading horizon Economic Investment Trust is expected to generate 0.84 times more return on investment than Bank of America. However, Economic Investment Trust is 1.19 times less risky than Bank of America. It trades about -0.31 of its potential returns per unit of risk. Bank of America is currently generating about -0.29 per unit of risk. If you would invest 17,450 in Economic Investment Trust on September 24, 2024 and sell it today you would lose (1,050) from holding Economic Investment Trust or give up 6.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Economic Investment Trust vs. Bank of America
Performance |
| Timeline |
| Economic Investment Trust |
| Bank of America |
Economic Investment and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Economic Investment and Bank of America
The main advantage of trading using opposite Economic Investment and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Economic Investment 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.| Economic Investment vs. Uniteds Limited | Economic Investment vs. E L Financial Corp | Economic Investment vs. Canadian General Investments | Economic Investment vs. Clairvest Group |
| Bank of America vs. Precision Drilling | Bank of America vs. Arbor Metals Corp | Bank of America vs. Economic Investment Trust | Bank of America vs. Diversified Royalty Corp |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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