Correlation Between Information Services and Bank of America
Can any of the company-specific risk be diversified away by investing in both Information Services 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 Information Services 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 Information Services and Bank of America, you can compare the effects of market volatilities on Information Services 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 Information Services with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Information Services and Bank of America.
Diversification Opportunities for Information Services and Bank of America
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Information and Bank is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Information Services 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 Information Services 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 Information Services 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 Information Services i.e., Information Services and Bank of America go up and down completely randomly.
Pair Corralation between Information Services and Bank of America
Assuming the 90 days trading horizon Information Services is expected to generate 1.66 times less return on investment than Bank of America. In addition to that, Information Services is 1.11 times more volatile than Bank of America. It trades about 0.03 of its total potential returns per unit of risk. Bank of America is currently generating about 0.06 per unit of volatility. If you would invest 1,423 in Bank of America on December 7, 2024 and sell it today you would earn a total of 720.00 from holding Bank of America or generate 50.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Information Services vs. Bank of America
Performance |
| Timeline |
| Information Services |
| Bank of America |
Information Services and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Information Services and Bank of America
The main advantage of trading using opposite Information Services and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Information Services 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.| Information Services vs. Solution Financial | Information Services vs. Chemtrade Logistics Income | Information Services vs. MTY Food Group | Information Services vs. High Liner Foods |
| Bank of America vs. Imperial Metals | Bank of America vs. Data Communications Management | Bank of America vs. South Pacific Metals | Bank of America vs. Profound Medical 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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