Correlation Between Bank of America and ATMOS

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

Diversification Opportunities for Bank of America and ATMOS

-0.5

Correlation Coefficient

Bank of America  ATMOS

Very good diversification

The 3 months correlation between Bank and ATMOS is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ATMOS ENERGY P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATMOS ENERGY P 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 ATMOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATMOS ENERGY P has no effect on the direction of Bank of America i.e., Bank of America and ATMOS go up and down completely randomly.

Pair Corralation between Bank of America and ATMOS

Considering the 90-day investment horizon Bank of America is expected to generate 59.32 times less return on investment than ATMOS. But when comparing it to its historical volatility, Bank of America is 45.72 times less risky than ATMOS. It trades about 0.05 of its potential returns per unit of risk. ATMOS ENERGY P is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,262  in ATMOS ENERGY P on September 20, 2024 and sell it today you would lose (86.00) from holding ATMOS ENERGY P or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.63%
Values	Daily Returns

Bank of America  vs.  ATMOS ENERGY P

Bank of America

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 6 (%) 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.

ATMOS ENERGY P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATMOS ENERGY P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ATMOS ENERGY P investors.

Pair Trading with Bank of America and ATMOS

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

The idea behind Bank of America and ATMOS ENERGY P 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.