Correlation Between Hiru and Bank of America
Can any of the company-specific risk be diversified away by investing in both Hiru 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 Hiru 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 Hiru Corporation and Bank of America, you can compare the effects of market volatilities on Hiru 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 Hiru with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hiru and Bank of America.
Diversification Opportunities for Hiru and Bank of America
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hiru and Bank is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hiru Corp. 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 Hiru 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 Hiru Corporation 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 Hiru i.e., Hiru and Bank of America go up and down completely randomly.
Pair Corralation between Hiru and Bank of America
Given the investment horizon of 90 days Hiru Corporation is expected to generate 10.66 times more return on investment than Bank of America. However, Hiru is 10.66 times more volatile than Bank of America. It trades about 0.05 of its potential returns per unit of risk. Bank of America is currently generating about 0.09 per unit of risk. If you would invest 0.46 in Hiru Corporation on September 12, 2024 and sell it today you would lose (0.33) from holding Hiru Corporation or give up 71.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hiru Corp. vs. Bank of America
Performance |
| Timeline |
| Hiru |
| Bank of America |
Hiru and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hiru and Bank of America
The main advantage of trading using opposite Hiru and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hiru 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 Hiru Corporation 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. JPMorgan Chase Co | Bank of America vs. Victory Integrity Smallmid Cap | Bank of America vs. Hilton Worldwide Holdings | Bank of America vs. NVIDIA |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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