Correlation Between Highwood Asset and Bank of America
Can any of the company-specific risk be diversified away by investing in both Highwood Asset 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 Highwood Asset 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 Highwood Asset Management and Bank of America, you can compare the effects of market volatilities on Highwood Asset 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 Highwood Asset with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highwood Asset and Bank of America.
Diversification Opportunities for Highwood Asset and Bank of America
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Highwood and Bank is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Highwood Asset Management 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 Highwood Asset 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 Highwood Asset Management 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 Highwood Asset i.e., Highwood Asset and Bank of America go up and down completely randomly.
Pair Corralation between Highwood Asset and Bank of America
Assuming the 90 days horizon Highwood Asset is expected to generate 3.01 times less return on investment than Bank of America. But when comparing it to its historical volatility, Highwood Asset Management is 1.26 times less risky than Bank of America. It trades about 0.13 of its potential returns per unit of risk. Bank of America is currently generating about 0.31 of returns per unit of risk over similar time horizon. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highwood Asset Management vs. Bank of America
Performance |
| Timeline |
| Highwood Asset Management |
| Bank of America |
Highwood Asset and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highwood Asset and Bank of America
The main advantage of trading using opposite Highwood Asset and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highwood Asset 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.| Highwood Asset vs. Walmart Inc CDR | Highwood Asset vs. Amazon CDR | Highwood Asset vs. Berkshire Hathaway CDR | Highwood Asset vs. UnitedHealth Group CDR |
| 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 |
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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