Correlation Between Bank of America and Orca Energy

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

Diversification Opportunities for Bank of America and Orca Energy

-0.78

Correlation Coefficient

Bank of America  Orca Energy

Pay attention - limited upside

The 3 months correlation between Bank and Orca is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Orca Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orca Energy Group 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 Orca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orca Energy Group has no effect on the direction of Bank of America i.e., Bank of America and Orca Energy go up and down completely randomly.

Pair Corralation between Bank of America and Orca Energy

Considering the 90-day investment horizon Bank of America is expected to generate 0.46 times more return on investment than Orca Energy. However, Bank of America is 2.18 times less risky than Orca Energy. It trades about 0.16 of its potential returns per unit of risk. Orca Energy Group is currently generating about -0.02 per unit of risk. If you would invest  4,044  in Bank of America on September 3, 2024 and sell it today you would earn a total of  707.00  from holding Bank of America or generate 17.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Bank of America  vs.  Orca Energy Group

Bank of America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Orca Energy Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orca Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Orca Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of America and Orca Energy

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

The idea behind Bank of America and Orca Energy Group 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.