Correlation Between Bank of America and Thermo Fisher
Can any of the company-specific risk be diversified away by investing in both Bank of America and Thermo Fisher 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 Thermo Fisher 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 Thermo Fisher Scientific, you can compare the effects of market volatilities on Bank of America and Thermo Fisher 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 Thermo Fisher. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Thermo Fisher.
Diversification Opportunities for Bank of America and Thermo Fisher
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Thermo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Thermo Fisher Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thermo Fisher Scientific 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 Thermo Fisher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thermo Fisher Scientific has no effect on the direction of Bank of America i.e., Bank of America and Thermo Fisher go up and down completely randomly.
Pair Corralation between Bank of America and Thermo Fisher
Considering the 90-day investment horizon Bank of America is expected to generate 1.18 times more return on investment than Thermo Fisher. However, Bank of America is 1.18 times more volatile than Thermo Fisher Scientific. It trades about 0.24 of its potential returns per unit of risk. Thermo Fisher Scientific is currently generating about 0.22 per unit of risk. If you would invest 3,579 in Bank of America on February 12, 2024 and sell it today you would earn a total of 266.00 from holding Bank of America or generate 7.43% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Bank of America vs. Thermo Fisher Scientific
Performance |
Timeline |
Bank of America |
Thermo Fisher Scientific |
Bank of America and Thermo Fisher Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Thermo Fisher
The main advantage of trading using opposite Bank of America and Thermo Fisher positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Thermo Fisher 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 Thermo Fisher will offset losses from the drop in Thermo Fisher's long position.The idea behind Bank of America and Thermo Fisher Scientific 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.Thermo Fisher vs. Verizon Communications | Thermo Fisher vs. Southern Copper | Thermo Fisher vs. Deutsche Bank Aktiengesellschaft | Thermo Fisher vs. New Oriental Education |
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 the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
Stocks Directory Find actively traded stocks across global markets | |
Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |