Correlation Between Bank of America and Forum Energy

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

Diversification Opportunities for Bank of America and Forum Energy

0.14

Correlation Coefficient

Bank of America  Forum Energy

Average diversification

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

Pair Corralation between Bank of America and Forum Energy

Considering the 90-day investment horizon Bank of America is expected to generate 4.47 times less return on investment than Forum Energy. But when comparing it to its historical volatility, Bank of America is 10.41 times less risky than Forum Energy. It trades about 0.15 of its potential returns per unit of risk. Forum Energy Metals is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3.00  in Forum Energy Metals on May 5, 2025 and sell it today you would earn a total of  0.00  from holding Forum Energy Metals or generate 0.0% return on investment over 90 days.

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

Bank of America  vs.  Forum Energy Metals

Bank of America

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Forum Energy Metals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Forum Energy Metals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Forum Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Forum Energy

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

The idea behind Bank of America and Forum Energy Metals 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.