Correlation Between JAPAN AIRLINES and Bank of America
Can any of the company-specific risk be diversified away by investing in both JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES and Verizon Communications, you can compare the effects of market volatilities on JAPAN AIRLINES 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 JAPAN AIRLINES with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of JAPAN AIRLINES and Bank of America.
Diversification Opportunities for JAPAN AIRLINES and Bank of America
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between JAPAN and Bank is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding JAPAN AIRLINES and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES i.e., JAPAN AIRLINES and Bank of America go up and down completely randomly.
Pair Corralation between JAPAN AIRLINES and Bank of America
Assuming the 90 days trading horizon JAPAN AIRLINES is expected to generate 1.02 times more return on investment than Bank of America. However, JAPAN AIRLINES is 1.02 times more volatile than Verizon Communications. It trades about 0.19 of its potential returns per unit of risk. Verizon Communications is currently generating about -0.19 per unit of risk. If you would invest 1,460 in JAPAN AIRLINES on September 22, 2024 and sell it today you would earn a total of 70.00 from holding JAPAN AIRLINES or generate 4.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
JAPAN AIRLINES vs. Verizon Communications
Performance |
| Timeline |
| JAPAN AIRLINES |
| Verizon Communications |
JAPAN AIRLINES and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with JAPAN AIRLINES and Bank of America
The main advantage of trading using opposite JAPAN AIRLINES and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JAPAN AIRLINES 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.| JAPAN AIRLINES vs. Amkor Technology | JAPAN AIRLINES vs. SCOTT TECHNOLOGY | JAPAN AIRLINES vs. UNITED RENTALS | JAPAN AIRLINES vs. Air Lease |
| Bank of America vs. Platinum Investment Management | Bank of America vs. CEOTRONICS | Bank of America vs. JAPAN AIRLINES | Bank of America vs. Southwest Airlines Co |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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