Correlation Between AMERITRUST CORP and B of A

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Can any of the company-specific risk be diversified away by investing in both AMERITRUST CORP and B of A 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 AMERITRUST CORP and B of A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AMERITRUST CORP and Bank Of America, you can compare the effects of market volatilities on AMERITRUST CORP and B of A 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 AMERITRUST CORP with a short position of B of A. Check out your portfolio center. Please also check ongoing floating volatility patterns of AMERITRUST CORP and B of A.

Diversification Opportunities for AMERITRUST CORP and B of A

  Correlation Coefficient

Very weak diversification

The 3 months correlation between AMERITRUST and B of A is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding AMERITRUST 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 AMERITRUST CORP 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 AMERITRUST CORP are associated (or correlated) with B of A. 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 AMERITRUST CORP i.e., AMERITRUST CORP and B of A go up and down completely randomly.

Pair Corralation between AMERITRUST CORP and B of A

Given the investment horizon of 90 days AMERITRUST CORP is expected to generate 8.75 times more return on investment than B of A. However, AMERITRUST CORP is 8.75 times more volatile than Bank Of America. It trades about 0.05 of its potential returns per unit of risk. Bank Of America is currently generating about 0.04 per unit of risk. If you would invest  39.00  in AMERITRUST CORP on May 9, 2022 and sell it today you would lose (38.90)  from holding AMERITRUST CORP or give up 99.74% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

AMERITRUST CORP  vs.  Bank Of America

 Performance (%) 
AMERITRUST Performance
0 of 100
Over the last 90 days AMERITRUST CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

AMERITRUST Price Channel

Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

AMERITRUST CORP and B of A Volatility Contrast

   Predicted Return Density   

Pair Trading with AMERITRUST CORP and B of A

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


Pair trading matchups for AMERITRUST CORP

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Universal Logis vs. AMERITRUST CORP
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against AMERITRUST CORP as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. AMERITRUST CORP's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, AMERITRUST CORP's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to AMERITRUST CORP.
The idea behind AMERITRUST 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.
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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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