Correlation Between Bank of America and Wesdome Gold

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

Diversification Opportunities for Bank of America and Wesdome Gold

-0.73
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Bank and Wesdome is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Wesdome Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesdome Gold Mines 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 Wesdome Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesdome Gold Mines has no effect on the direction of Bank of America i.e., Bank of America and Wesdome Gold go up and down completely randomly.

Pair Corralation between Bank of America and Wesdome Gold

Considering the 90-day investment horizon Bank of America is expected to generate 0.71 times more return on investment than Wesdome Gold. However, Bank of America is 1.41 times less risky than Wesdome Gold. It trades about 0.23 of its potential returns per unit of risk. Wesdome Gold Mines is currently generating about -0.02 per unit of risk. If you would invest  4,011  in Bank of America on September 4, 2024 and sell it today you would earn a total of  693.00  from holding Bank of America or generate 17.28% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy97.62%
ValuesDaily Returns

Bank of America  vs.  Wesdome Gold Mines

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
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 unsteady basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.
Wesdome Gold Mines 

Risk-Adjusted Performance

0 of 100

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

Bank of America and Wesdome Gold Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and Wesdome Gold

The main advantage of trading using opposite Bank of America and Wesdome Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Wesdome Gold 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 Wesdome Gold will offset losses from the drop in Wesdome Gold's long position.
The idea behind Bank of America and Wesdome Gold Mines 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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