Correlation Between Trade Desk and Bank of America
Can any of the company-specific risk be diversified away by investing in both Trade Desk 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 Trade Desk 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 The Trade Desk and Bank of America, you can compare the effects of market volatilities on Trade Desk 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 Trade Desk with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Desk and Bank of America.
Diversification Opportunities for Trade Desk and Bank of America
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Trade and Bank is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk 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 Trade Desk 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 The Trade Desk 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 Trade Desk i.e., Trade Desk and Bank of America go up and down completely randomly.
Pair Corralation between Trade Desk and Bank of America
Assuming the 90 days trading horizon Trade Desk is expected to generate 1.3 times less return on investment than Bank of America. In addition to that, Trade Desk is 1.52 times more volatile than Bank of America. It trades about 0.17 of its total potential returns per unit of risk. Bank of America is currently generating about 0.33 per unit of volatility. If you would invest 6,108 in Bank of America on August 28, 2024 and sell it today you would earn a total of 818.00 from holding Bank of America or generate 13.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Trade Desk vs. Bank of America
Performance |
| Timeline |
| Trade Desk |
| Bank of America |
Trade Desk and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trade Desk and Bank of America
The main advantage of trading using opposite Trade Desk and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk 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.| Trade Desk vs. BIONTECH SE DRN | Trade Desk vs. Take Two Interactive Software | Trade Desk vs. Spotify Technology SA | Trade Desk vs. Mangels Industrial SA |
| Bank of America vs. MAHLE Metal Leve | Bank of America vs. Metalurgica Gerdau SA | Bank of America vs. Cognizant Technology Solutions | Bank of America vs. Align Technology |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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