# Correlation Between Bank of America and SCOR PK

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

## Diversification Opportunities for Bank of America and SCOR PK

 -0.12 Correlation Coefficient

### Good diversification

The 3 months correlation between Bank and SCOR is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SCOR PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCOR PK 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 SCOR PK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCOR PK has no effect on the direction of Bank of America i.e., Bank of America and SCOR PK go up and down completely randomly.

## Pair Corralation between Bank of America and SCOR PK

Considering the 90-day investment horizon Bank of America is expected to generate 0.38 times more return on investment than SCOR PK. However, Bank of America is 2.62 times less risky than SCOR PK. It trades about -0.18 of its potential returns per unit of risk. SCOR PK is currently generating about -0.3 per unit of risk. If you would invest  4,189  in Bank of America on May 16, 2024 and sell it today you would lose (343.00) from holding Bank of America or give up 8.19% of portfolio value over 90 days.
 Time Period 3 Months [change] Direction Moves Against Strength Insignificant Accuracy 100.0% Values Daily Returns

## Bank of America  vs.  SCOR PK

 Performance
 Timeline
 Bank of America Correlation Profile

### 0 of 100

 Weak Strong
Very Weak
Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of America is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
 Performance Backtest Predict
 SCOR PK Correlation Profile

### 0 of 100

 Weak Strong
Very Weak
Over the last 90 days SCOR PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in September 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
 Performance Backtest Predict

## Bank of America and SCOR PK Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with Bank of America and SCOR PK

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