Correlation Between Bank of America and Graphite One

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

Diversification Opportunities for Bank of America and Graphite One

-0.58

Correlation Coefficient

Bank of America  Graphite One

Excellent diversification

The 3 months correlation between Bank and Graphite is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Graphite One in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphite One 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 Graphite One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphite One has no effect on the direction of Bank of America i.e., Bank of America and Graphite One go up and down completely randomly.

Pair Corralation between Bank of America and Graphite One

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Graphite One. But the preferred stock apears to be less risky and, when comparing its historical volatility, Bank of America is 17.84 times less risky than Graphite One. The preferred stock trades about -0.18 of its potential returns per unit of risk. The Graphite One is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  53.00  in Graphite One on September 11, 2025 and sell it today you would earn a total of  48.00  from holding Graphite One or generate 90.57% return on investment over 90 days.

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

Bank of America  vs.  Graphite One

Bank of America

Risk-Adjusted Performance

Weakest

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Bank of America is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Graphite One

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Graphite One are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, Graphite One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Graphite One

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

The idea behind Bank of America and Graphite One 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..