Correlation Between Bank of America and Calamos Timpani

Can any of the company-specific risk be diversified away by investing in both Bank of America and Calamos Timpani 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 Calamos Timpani 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 Calamos Timpani Small, you can compare the effects of market volatilities on Bank of America and Calamos Timpani 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 Calamos Timpani. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Calamos Timpani.

Diversification Opportunities for Bank of America and Calamos Timpani

0.71

Correlation Coefficient

Bank of America  Calamos Timpani

Poor diversification

The 3 months correlation between Bank and Calamos is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Calamos Timpani Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calamos Timpani Small 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 Calamos Timpani. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calamos Timpani Small has no effect on the direction of Bank of America i.e., Bank of America and Calamos Timpani go up and down completely randomly.

Pair Corralation between Bank of America and Calamos Timpani

Considering the 90-day investment horizon Bank of America is expected to generate 1.2 times less return on investment than Calamos Timpani. In addition to that, Bank of America is 1.14 times more volatile than Calamos Timpani Small. It trades about 0.02 of its total potential returns per unit of risk. Calamos Timpani Small is currently generating about 0.03 per unit of volatility. If you would invest  2,617  in Calamos Timpani Small on February 3, 2024 and sell it today you would earn a total of  481.00  from holding Calamos Timpani Small or generate 18.38% return on investment over 90 days.

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

Bank of America  vs.  Calamos Timpani Small

Bank of America

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 11 (%) 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 June 2024.

Calamos Timpani Small

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Calamos Timpani Small are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Calamos Timpani may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Bank of America and Calamos Timpani

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

The idea behind Bank of America and Calamos Timpani Small 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.