Correlation Between Bank of America and Rogers Communications

Can any of the company-specific risk be diversified away by investing in both Bank of America and Rogers Communications 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 Bank of America and Rogers Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Verizon Communications and Rogers Communications, you can compare the effects of market volatilities on Bank of America and Rogers Communications 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 Bank of America with a short position of Rogers Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Rogers Communications.

Diversification Opportunities for Bank of America and Rogers Communications

-0.27

Correlation Coefficient

Bank of America  Rogers Communications

Very good diversification

The 3 months correlation between Bank and Rogers is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Rogers Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rogers Communications and Bank of America 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 Verizon Communications are associated (or correlated) with Rogers Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rogers Communications has no effect on the direction of Bank of America i.e., Bank of America and Rogers Communications go up and down completely randomly.

Pair Corralation between Bank of America and Rogers Communications

Assuming the 90 days trading horizon Verizon Communications is expected to generate 1.13 times more return on investment than Rogers Communications. However, Bank of America is 1.13 times more volatile than Rogers Communications. It trades about 0.13 of its potential returns per unit of risk. Rogers Communications is currently generating about -0.08 per unit of risk. If you would invest  3,728  in Verizon Communications on September 2, 2024 and sell it today you would earn a total of  447.00  from holding Verizon Communications or generate 11.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Verizon Communications  vs.  Rogers Communications

Verizon Communications

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rogers Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rogers Communications has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's forward indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Bank of America and Rogers Communications

The main advantage of trading using opposite Bank of America and Rogers Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Rogers Communications 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 Rogers Communications will offset losses from the drop in Rogers Communications' long position.

The idea behind Verizon Communications and Rogers Communications 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.