Correlation Between B of A and Twitter

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

Diversification Opportunities for B of A and Twitter

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between B of A and Twitter is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Twitter in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Twitter 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 Twitter. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Twitter has no effect on the direction of B of A i.e., B of A and Twitter go up and down completely randomly.

Pair Corralation between B of A and Twitter

Considering the 90-day investment horizon B of A is expected to generate 1.68 times less return on investment than Twitter. In addition to that, B of A is 1.06 times more volatile than Twitter. It trades about 0.19 of its total potential returns per unit of risk. Twitter is currently generating about 0.33 per unit of volatility. If you would invest  3,960  in Twitter on May 21, 2022 and sell it today you would earn a total of  439.00  from holding Twitter or generate 11.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bank Of America  vs.  Twitter

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

Twitter 
Twitter Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Twitter are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Twitter reported solid returns over the last few months and may actually be approaching a breakup point.

Twitter Price Channel

B of A and Twitter Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Twitter

The main advantage of trading using opposite B of A and Twitter positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A position performs unexpectedly, Twitter 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 Twitter will offset losses from the drop in Twitter's long position.
The idea behind Bank Of America and Twitter 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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