Correlation Between Bank of America and Alkermes Plc
Can any of the company-specific risk be diversified away by investing in both Bank of America and Alkermes Plc 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 Alkermes Plc 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 Alkermes Plc, you can compare the effects of market volatilities on Bank of America and Alkermes Plc 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 Alkermes Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Alkermes Plc.
Diversification Opportunities for Bank of America and Alkermes Plc
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and Alkermes is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Alkermes Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alkermes Plc 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 Alkermes Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alkermes Plc has no effect on the direction of Bank of America i.e., Bank of America and Alkermes Plc go up and down completely randomly.
Pair Corralation between Bank of America and Alkermes Plc
Considering the 90-day investment horizon Bank Of America is expected to generate 0.58 times more return on investment than Alkermes Plc. However, Bank Of America is 1.71 times less risky than Alkermes Plc. It trades about 0.14 of its potential returns per unit of risk. Alkermes Plc is currently generating about -0.01 per unit of risk. If you would invest 2,824 in Bank Of America on December 29, 2023 and sell it today you would earn a total of 968.00 from holding Bank Of America or generate 34.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Bank Of America vs. Alkermes Plc
Performance |
Timeline |
Bank Of America |
Alkermes Plc |
Bank of America and Alkermes Plc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Alkermes Plc
The main advantage of trading using opposite Bank of America and Alkermes Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Alkermes Plc 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 Alkermes Plc will offset losses from the drop in Alkermes Plc's long position.Bank of America vs. Bank Of America | Bank of America vs. Deckers Outdoor | Bank of America vs. Intuitive Machines | Bank of America vs. Liberty Interactive LLC |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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