Correlation Between Bank of America and Skyworks Solutions

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

Diversification Opportunities for Bank of America and Skyworks Solutions

0.03

Correlation Coefficient

Bank of America  Skyworks Solutions

Significant diversification

The 3 months correlation between Bank and Skyworks is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Skyworks Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyworks Solutions 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 Skyworks Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyworks Solutions has no effect on the direction of Bank of America i.e., Bank of America and Skyworks Solutions go up and down completely randomly.

Pair Corralation between Bank of America and Skyworks Solutions

Considering the 90-day investment horizon Bank of America is expected to generate 0.43 times more return on investment than Skyworks Solutions. However, Bank of America is 2.32 times less risky than Skyworks Solutions. It trades about -0.02 of its potential returns per unit of risk. Skyworks Solutions is currently generating about -0.19 per unit of risk. If you would invest  3,730  in Bank of America on February 2, 2024 and sell it today you would lose (35.00) from holding Bank of America or give up 0.94% of portfolio value over 90 days.

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

Bank of America  vs.  Skyworks Solutions

Bank of America

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Skyworks Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Skyworks Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward-looking signals remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Bank of America and Skyworks Solutions

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

The idea behind Bank of America and Skyworks Solutions 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.