Correlation Between Peak Resources and Bank of America
Can any of the company-specific risk be diversified away by investing in both Peak Resources and Bank of America 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 Peak Resources and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Peak Resources Limited and Verizon Communications, you can compare the effects of market volatilities on Peak Resources and Bank of America 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 Peak Resources with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peak Resources and Bank of America.
Diversification Opportunities for Peak Resources and Bank of America
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Peak and Bank is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Peak Resources Limited and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and Peak Resources 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 Peak Resources Limited are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verizon Communications has no effect on the direction of Peak Resources i.e., Peak Resources and Bank of America go up and down completely randomly.
Pair Corralation between Peak Resources and Bank of America
Assuming the 90 days horizon Peak Resources Limited is expected to generate 9.15 times more return on investment than Bank of America. However, Peak Resources is 9.15 times more volatile than Verizon Communications. It trades about 0.04 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.24 per unit of risk. If you would invest 6.35 in Peak Resources Limited on September 8, 2024 and sell it today you would lose (0.10) from holding Peak Resources Limited or give up 1.57% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Peak Resources Limited vs. Verizon Communications
Performance |
Timeline |
Peak Resources |
Verizon Communications |
Peak Resources and Bank of America Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Peak Resources and Bank of America
The main advantage of trading using opposite Peak Resources and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peak Resources position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.Peak Resources vs. SYSTEMAIR AB | Peak Resources vs. Thai Beverage Public | Peak Resources vs. DELTA AIR LINES | Peak Resources vs. Alaska Air Group |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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