Correlation Between Bank of America and Cymbria

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

Diversification Opportunities for Bank of America and Cymbria

0.73

Correlation Coefficient

Bank of America  Cymbria

Poor diversification

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

Pair Corralation between Bank of America and Cymbria

Assuming the 90 days trading horizon Bank of America is expected to generate 1.47 times more return on investment than Cymbria. However, Bank of America is 1.47 times more volatile than Cymbria. It trades about 0.12 of its potential returns per unit of risk. Cymbria is currently generating about 0.01 per unit of risk. If you would invest  2,035  in Bank of America on September 25, 2024 and sell it today you would earn a total of  245.00  from holding Bank of America or generate 12.04% return on investment over 90 days.

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

Bank of America  vs.  Cymbria

Bank of America

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cymbria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cymbria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Cymbria is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank of America and Cymbria

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

The idea behind Bank of America and Cymbria 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.