Correlation Between TOTAL GABON and Bank of America
Can any of the company-specific risk be diversified away by investing in both TOTAL GABON 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 TOTAL GABON 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 TOTAL GABON and Verizon Communications, you can compare the effects of market volatilities on TOTAL GABON 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 TOTAL GABON with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOTAL GABON and Bank of America.
Diversification Opportunities for TOTAL GABON and Bank of America
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TOTAL and Bank is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding TOTAL GABON and Verizon Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verizon Communications and TOTAL GABON 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 TOTAL GABON 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 TOTAL GABON i.e., TOTAL GABON and Bank of America go up and down completely randomly.
Pair Corralation between TOTAL GABON and Bank of America
Assuming the 90 days trading horizon TOTAL GABON is expected to generate 1.91 times more return on investment than Bank of America. However, TOTAL GABON is 1.91 times more volatile than Verizon Communications. It trades about 0.12 of its potential returns per unit of risk. Verizon Communications is currently generating about 0.12 per unit of risk. If you would invest 15,500 in TOTAL GABON on September 6, 2024 and sell it today you would earn a total of 3,000 from holding TOTAL GABON or generate 19.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
TOTAL GABON vs. Verizon Communications
Performance |
Timeline |
TOTAL GABON |
Verizon Communications |
TOTAL GABON and Bank of America Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with TOTAL GABON and Bank of America
The main advantage of trading using opposite TOTAL GABON and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOTAL GABON 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.The idea behind TOTAL GABON and Verizon Communications 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.Bank of America vs. Tianjin Capital Environmental | Bank of America vs. Steel Dynamics | Bank of America vs. United States Steel | Bank of America vs. Astral Foods Limited |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
FinTech Suite Use AI to screen and filter profitable investment opportunities | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |