Correlation Between Bank of America and Tecsys

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

Diversification Opportunities for Bank of America and Tecsys

0.8

Correlation Coefficient

Bank of America  Tecsys

Very poor diversification

The 3 months correlation between Bank and Tecsys is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Tecsys Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tecsys Inc 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 Tecsys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tecsys Inc has no effect on the direction of Bank of America i.e., Bank of America and Tecsys go up and down completely randomly.

Pair Corralation between Bank of America and Tecsys

Considering the 90-day investment horizon Bank of America is expected to generate 1.13 times less return on investment than Tecsys. In addition to that, Bank of America is 1.41 times more volatile than Tecsys Inc. It trades about 0.13 of its total potential returns per unit of risk. Tecsys Inc is currently generating about 0.2 per unit of volatility. If you would invest  2,902  in Tecsys Inc on September 20, 2024 and sell it today you would earn a total of  426.00  from holding Tecsys Inc or generate 14.68% 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.  Tecsys Inc

Bank of America

Risk-Adjusted Performance

10 of 100

Modest

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

Tecsys Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tecsys Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Tecsys reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Tecsys

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

The idea behind Bank of America and Tecsys Inc 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.