Correlation Between Bank of America and Infinite Acquisition

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

Diversification Opportunities for Bank of America and Infinite Acquisition

0.82

Correlation Coefficient

Bank of America  Infinite Acquisition

Very poor diversification

The 3 months correlation between Bank and Infinite is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Infinite Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infinite Acquisition Corp 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 Infinite Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infinite Acquisition Corp has no effect on the direction of Bank of America i.e., Bank of America and Infinite Acquisition go up and down completely randomly.

Pair Corralation between Bank of America and Infinite Acquisition

Considering the 90-day investment horizon Bank of America is expected to generate 11.86 times more return on investment than Infinite Acquisition. However, Bank of America is 11.86 times more volatile than Infinite Acquisition Corp. It trades about 0.11 of its potential returns per unit of risk. Infinite Acquisition Corp is currently generating about 0.25 per unit of risk. If you would invest  2,759  in Bank of America on February 22, 2024 and sell it today you would earn a total of  1,217  from holding Bank of America or generate 44.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	37.12%
Values	Daily Returns

Bank of America  vs.  Infinite Acquisition Corp

Bank of America

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Infinite Acquisition Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infinite Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Infinite Acquisition is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and Infinite Acquisition

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

The idea behind Bank of America and Infinite Acquisition Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.