Correlation Between B of A and Appian Corp

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Can any of the company-specific risk be diversified away by investing in both B of A and Appian Corp 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 B of A and Appian Corp 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 Appian Corp Cl, you can compare the effects of market volatilities on B of A and Appian Corp 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 B of A with a short position of Appian Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of B of A and Appian Corp.

Diversification Opportunities for B of A and Appian Corp

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between B of A and Appian is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Appian Corp Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Appian Corp Cl and B of A 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 Appian Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Appian Corp Cl has no effect on the direction of B of A i.e., B of A and Appian Corp go up and down completely randomly.

Pair Corralation between B of A and Appian Corp

Considering the 90-day investment horizon B of A is expected to generate 1.58 times less return on investment than Appian Corp. But when comparing it to its historical volatility, Bank Of America is 2.85 times less risky than Appian Corp. It trades about 0.05 of its potential returns per unit of risk. Appian Corp Cl is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,325  in Appian Corp Cl on May 15, 2022 and sell it today you would earn a total of  87.00  from holding Appian Corp Cl or generate 1.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Bank Of America  vs.  Appian Corp Cl

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Appian Corp Cl 
Appian Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Appian Corp Cl are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Appian Corp may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Appian Price Channel

B of A and Appian Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Appian Corp

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

Appian Corp Cl

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Appian Corp as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Appian Corp's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Appian Corp's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Appian Corp Cl.
Check out your portfolio center. 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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