Correlation Between Bank of America and GBT Technologies

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

Diversification Opportunities for Bank of America and GBT Technologies

-0.14

Correlation Coefficient

Bank of America  GBT Technologies

Good diversification

The 3 months correlation between Bank and GBT is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and GBT Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GBT Technologies 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 GBT Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GBT Technologies has no effect on the direction of Bank of America i.e., Bank of America and GBT Technologies go up and down completely randomly.

Pair Corralation between Bank of America and GBT Technologies

Considering the 90-day investment horizon Bank of America is expected to generate 71.59 times less return on investment than GBT Technologies. But when comparing it to its historical volatility, Bank of America is 108.08 times less risky than GBT Technologies. It trades about 0.29 of its potential returns per unit of risk. GBT Technologies is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  0.01  in GBT Technologies on August 31, 2024 and sell it today you would earn a total of  0.00  from holding GBT Technologies or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  GBT Technologies

Bank of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

GBT Technologies

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GBT Technologies are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, GBT Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and GBT Technologies

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

The idea behind Bank of America and GBT Technologies 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.