Correlation Between Bank of America and CHUGOKU EL

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

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

Diversification Opportunities for Bank of America and CHUGOKU EL

-0.57

Correlation Coefficient

Bank of America  CHUGOKU EL

Excellent diversification

The 3 months correlation between Bank and CHUGOKU is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and CHUGOKU EL PWR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHUGOKU EL PWR 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 CHUGOKU EL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHUGOKU EL PWR has no effect on the direction of Bank of America i.e., Bank of America and CHUGOKU EL go up and down completely randomly.

Pair Corralation between Bank of America and CHUGOKU EL

Assuming the 90 days trading horizon Verizon Communications is expected to generate 0.47 times more return on investment than CHUGOKU EL. However, Verizon Communications is 2.11 times less risky than CHUGOKU EL. It trades about 0.06 of its potential returns per unit of risk. CHUGOKU EL PWR is currently generating about -0.06 per unit of risk. If you would invest  3,883  in Verizon Communications on September 12, 2024 and sell it today you would earn a total of  158.00  from holding Verizon Communications or generate 4.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Verizon Communications  vs.  CHUGOKU EL PWR

Verizon Communications

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verizon Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Bank of America is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CHUGOKU EL PWR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CHUGOKU EL PWR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic 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 CHUGOKU EL

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

The idea behind Verizon Communications and CHUGOKU EL PWR 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.