Correlation Between B of A and Teucrium Corn

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

Diversification Opportunities for B of A and Teucrium Corn

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between B of A and Teucrium is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Teucrium Corn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teucrium Corn 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 Teucrium Corn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teucrium Corn has no effect on the direction of B of A i.e., B of A and Teucrium Corn go up and down completely randomly.

Pair Corralation between B of A and Teucrium Corn

Considering the 90-day investment horizon Bank Of America is expected to under-perform the Teucrium Corn. In addition to that, B of A is 1.33 times more volatile than Teucrium Corn. It trades about -0.03 of its total potential returns per unit of risk. Teucrium Corn is currently generating about 0.06 per unit of volatility. If you would invest  2,136  in Teucrium Corn on September 7, 2022 and sell it today you would earn a total of  429.00  from holding Teucrium Corn or generate 20.08% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Bank Of America  vs.  Teucrium Corn

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bank Of America are ranked lower than 2 (%) 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

Teucrium Corn 
Teucrium Performance
0 of 100
Over the last 90 days Teucrium Corn has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Teucrium Corn is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Teucrium Price Channel

B of A and Teucrium Corn Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Teucrium Corn

The main advantage of trading using opposite B of A and Teucrium Corn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A position performs unexpectedly, Teucrium Corn 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 Teucrium Corn will offset losses from the drop in Teucrium Corn's long position.
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The idea behind Bank Of America and Teucrium Corn 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.
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 Teucrium Corn 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. Teucrium Corn'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, Teucrium Corn'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 Teucrium Corn.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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