Correlation Between Bank of America and Wirecard

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

Diversification Opportunities for Bank of America and Wirecard

-0.33

Correlation Coefficient

Bank of America  Wirecard

Very good diversification

The 3 months correlation between Bank and Wirecard is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Wirecard AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wirecard AG 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 Wirecard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wirecard AG has no effect on the direction of Bank of America i.e., Bank of America and Wirecard go up and down completely randomly.

Pair Corralation between Bank of America and Wirecard

Considering the 90-day investment horizon Bank of America is expected to generate 76.54 times less return on investment than Wirecard. But when comparing it to its historical volatility, Bank of America is 77.96 times less risky than Wirecard. It trades about 0.11 of its potential returns per unit of risk. Wirecard AG is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Wirecard AG on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Wirecard AG or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Bank of America  vs.  Wirecard AG

Bank of America

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) 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.

Wirecard AG

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wirecard AG are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Wirecard reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Wirecard

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

The idea behind Bank of America and Wirecard AG 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.