Correlation Between Bank of America and Focus Graphite

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

Diversification Opportunities for Bank of America and Focus Graphite

-0.77

Correlation Coefficient

Bank of America  Focus Graphite

Pay attention - limited upside

The 3 months correlation between Bank and Focus is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Focus Graphite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Graphite 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 Focus Graphite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Graphite has no effect on the direction of Bank of America i.e., Bank of America and Focus Graphite go up and down completely randomly.

Pair Corralation between Bank of America and Focus Graphite

Assuming the 90 days trading horizon Bank of America is expected to generate 1.99 times less return on investment than Focus Graphite. But when comparing it to its historical volatility, Bank of America is 3.45 times less risky than Focus Graphite. It trades about 0.03 of its potential returns per unit of risk. Focus Graphite is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Focus Graphite on March 19, 2024 and sell it today you would lose (11.00) from holding Focus Graphite or give up 45.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.78%
Values	Daily Returns

Bank of America  vs.  Focus Graphite

Bank of America

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Focus Graphite

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Focus Graphite has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Bank of America and Focus Graphite

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

The idea behind Bank of America and Focus Graphite 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.