Correlation Between Bank of America and ATT
Can any of the company-specific risk be diversified away by investing in both Bank of America and ATT 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 ATT 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 ATT Inc, you can compare the effects of market volatilities on Bank of America and ATT 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 ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and ATT.
Diversification Opportunities for Bank of America and ATT
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and ATT is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ATT Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc has no effect on the direction of Bank of America i.e., Bank of America and ATT go up and down completely randomly.
Pair Corralation between Bank of America and ATT
Assuming the 90 days trading horizon Bank of America is expected to generate 0.99 times more return on investment than ATT. However, Bank of America is 1.01 times less risky than ATT. It trades about -0.08 of its potential returns per unit of risk. ATT Inc is currently generating about -0.11 per unit of risk. If you would invest 2,217 in Bank of America on September 1, 2024 and sell it today you would lose (31.00) from holding Bank of America or give up 1.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. ATT Inc
Performance |
| Timeline |
| Bank of America |
| ATT Inc |
Bank of America and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and ATT
The main advantage of trading using opposite Bank of America and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Capital One Financial | Bank of America vs. Capital One Financial |
| ATT vs. Telephone and Data | ATT vs. Telephone and Data | ATT vs. Palantir Technologies Class | ATT vs. Walmart |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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