Correlation Between Bank of America and CCC Intelligent

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

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

Diversification Opportunities for Bank of America and CCC Intelligent

0.86

Correlation Coefficient

Bank of America  CCC Intelligent

Very poor diversification

The 3 months correlation between Bank and CCC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and CCC Intelligent Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCC Intelligent Solutions 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 Bank of America are associated (or correlated) with CCC Intelligent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCC Intelligent Solutions has no effect on the direction of Bank of America i.e., Bank of America and CCC Intelligent go up and down completely randomly.

Pair Corralation between Bank of America and CCC Intelligent

Considering the 90-day investment horizon Bank of America is expected to generate 1.21 times less return on investment than CCC Intelligent. In addition to that, Bank of America is 1.28 times more volatile than CCC Intelligent Solutions. It trades about 0.27 of its total potential returns per unit of risk. CCC Intelligent Solutions is currently generating about 0.42 per unit of volatility. If you would invest  1,093  in CCC Intelligent Solutions on August 30, 2024 and sell it today you would earn a total of  168.00  from holding CCC Intelligent Solutions or generate 15.37% return on investment over 90 days.

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

Bank of America  vs.  CCC Intelligent Solutions

Bank of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

CCC Intelligent Solutions

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CCC Intelligent Solutions are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, CCC Intelligent unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and CCC Intelligent

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

The idea behind Bank of America and CCC Intelligent Solutions 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.