Correlation Between Bank of America and CullenFrost Bankers
Can any of the company-specific risk be diversified away by investing in both Bank of America and CullenFrost Bankers 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 CullenFrost Bankers 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 CullenFrost Bankers, you can compare the effects of market volatilities on Bank of America and CullenFrost Bankers 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 CullenFrost Bankers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and CullenFrost Bankers.
Diversification Opportunities for Bank of America and CullenFrost Bankers
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and CullenFrost is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of Bank of America i.e., Bank of America and CullenFrost Bankers go up and down completely randomly.
Pair Corralation between Bank of America and CullenFrost Bankers
Assuming the 90 days trading horizon Bank of America is expected to generate 1.09 times less return on investment than CullenFrost Bankers. But when comparing it to its historical volatility, Bank of America is 1.25 times less risky than CullenFrost Bankers. It trades about 0.06 of its potential returns per unit of risk. CullenFrost Bankers is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,681 in CullenFrost Bankers on August 30, 2024 and sell it today you would earn a total of 283.00 from holding CullenFrost Bankers or generate 16.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. CullenFrost Bankers
Performance |
| Timeline |
| Bank of America |
| CullenFrost Bankers |
Bank of America and CullenFrost Bankers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and CullenFrost Bankers
The main advantage of trading using opposite Bank of America and CullenFrost Bankers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, CullenFrost Bankers 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 CullenFrost Bankers will offset losses from the drop in CullenFrost Bankers' long position.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. Wells Fargo | Bank of America vs. JPMorgan Chase Co | Bank of America vs. Wells Fargo |
| CullenFrost Bankers vs. Truist Financial | CullenFrost Bankers vs. Citizens Financial Group | CullenFrost Bankers vs. Bank of America | CullenFrost Bankers vs. US Bancorp |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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