Correlation Between Sphere 3D and Bank of America

Can any of the company-specific risk be diversified away by investing in both Sphere 3D 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 Sphere 3D 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 Sphere 3D Corp and Bank of America, you can compare the effects of market volatilities on Sphere 3D 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 Sphere 3D with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sphere 3D and Bank of America.

Diversification Opportunities for Sphere 3D and Bank of America

-0.74

Correlation Coefficient

Sphere 3D  Bank of America

Pay attention - limited upside

The 3 months correlation between Sphere and Bank is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Sphere 3D Corp and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Sphere 3D 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 Sphere 3D Corp 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 Bank of America has no effect on the direction of Sphere 3D i.e., Sphere 3D and Bank of America go up and down completely randomly.

Pair Corralation between Sphere 3D and Bank of America

Considering the 90-day investment horizon Sphere 3D Corp is expected to generate 7.42 times more return on investment than Bank of America. However, Sphere 3D is 7.42 times more volatile than Bank of America. It trades about 0.03 of its potential returns per unit of risk. Bank of America is currently generating about 0.19 per unit of risk. If you would invest  141.00  in Sphere 3D Corp on January 19, 2024 and sell it today you would lose (32.00) from holding Sphere 3D Corp or give up 22.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Sphere 3D Corp  vs.  Bank of America

Sphere 3D Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere 3D Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

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 unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Sphere 3D and Bank of America

The main advantage of trading using opposite Sphere 3D and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere 3D 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 Sphere 3D Corp and Bank of America 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.