Correlation Between Bank of America and Blue Moon

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

Diversification Opportunities for Bank of America and Blue Moon

-0.7

Correlation Coefficient

Bank of America  Blue Moon

Excellent diversification

The 3 months correlation between Bank and Blue is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Blue Moon Zinc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Moon Zinc 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 Blue Moon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Moon Zinc has no effect on the direction of Bank of America i.e., Bank of America and Blue Moon go up and down completely randomly.

Pair Corralation between Bank of America and Blue Moon

Assuming the 90 days trading horizon Bank of America is expected to generate 0.12 times more return on investment than Blue Moon. However, Bank of America is 8.62 times less risky than Blue Moon. It trades about 0.32 of its potential returns per unit of risk. Blue Moon Zinc is currently generating about -0.04 per unit of risk. If you would invest  1,934  in Bank of America on March 3, 2024 and sell it today you would earn a total of  164.00  from holding Bank of America or generate 8.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Bank of America  vs.  Blue Moon Zinc

Bank of America

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Blue Moon Zinc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Moon Zinc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in July 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Bank of America and Blue Moon

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

The idea behind Bank of America and Blue Moon Zinc 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.