Correlation Between Intel and Bank of America
Can any of the company-specific risk be diversified away by investing in both Intel 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 Intel 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 Intel and Verizon Communications, you can compare the effects of market volatilities on Intel 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 Intel with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and Bank of America.
Diversification Opportunities for Intel and Bank of America
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Intel and Bank is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Intel and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Intel 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 Intel 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 Verizon Communications has no effect on the direction of Intel i.e., Intel and Bank of America go up and down completely randomly.
Pair Corralation between Intel and Bank of America
Assuming the 90 days trading horizon Intel is expected to under-perform the Bank of America. In addition to that, Intel is 2.52 times more volatile than Verizon Communications. It trades about -0.06 of its total potential returns per unit of risk. Verizon Communications is currently generating about 0.08 per unit of volatility. If you would invest 3,113 in Verizon Communications on September 14, 2024 and sell it today you would earn a total of 911.00 from holding Verizon Communications or generate 29.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intel vs. Verizon Communications
Performance |
| Timeline |
| Intel |
| Verizon Communications |
Intel and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intel and Bank of America
The main advantage of trading using opposite Intel and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel 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.| Intel vs. Verizon Communications | Intel vs. Grand Canyon Education | Intel vs. Chunghwa Telecom Co | Intel vs. CITIC Telecom International |
| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Apple Inc |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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