Correlation Between Bank of America and Celularity

Can any of the company-specific risk be diversified away by investing in both Bank of America and Celularity 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 Celularity 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 Celularity, you can compare the effects of market volatilities on Bank of America and Celularity 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 Celularity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Celularity.

Diversification Opportunities for Bank of America and Celularity

0.39

Correlation Coefficient

Bank of America  Celularity

Weak diversification

The 3 months correlation between Bank and Celularity is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Celularity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celularity 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 Celularity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celularity has no effect on the direction of Bank of America i.e., Bank of America and Celularity go up and down completely randomly.

Pair Corralation between Bank of America and Celularity

Considering the 90-day investment horizon Bank of America is expected to generate 12.59 times less return on investment than Celularity. But when comparing it to its historical volatility, Bank of America is 14.38 times less risky than Celularity. It trades about 0.17 of its potential returns per unit of risk. Celularity is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1.25  in Celularity on August 31, 2024 and sell it today you would earn a total of  0.74  from holding Celularity or generate 59.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	71.43%
Values	Daily Returns

Bank of America  vs.  Celularity

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 sluggish basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Celularity

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Celularity are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Celularity showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Celularity

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

The idea behind Bank of America and Celularity 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.