Correlation Between Bank of America and Equitable Holdings
Can any of the company-specific risk be diversified away by investing in both Bank of America and Equitable Holdings 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 Equitable Holdings 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 Equitable Holdings, you can compare the effects of market volatilities on Bank of America and Equitable Holdings 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 Equitable Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Equitable Holdings.
Diversification Opportunities for Bank of America and Equitable Holdings
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Equitable is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings 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 Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of Bank of America i.e., Bank of America and Equitable Holdings go up and down completely randomly.
Pair Corralation between Bank of America and Equitable Holdings
Assuming the 90 days trading horizon Bank of America is expected to generate 0.73 times more return on investment than Equitable Holdings. However, Bank of America is 1.38 times less risky than Equitable Holdings. It trades about 0.04 of its potential returns per unit of risk. Equitable Holdings is currently generating about 0.03 per unit of risk. If you would invest 1,650 in Bank of America on August 26, 2024 and sell it today you would earn a total of 298.00 from holding Bank of America or generate 18.06% 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. Equitable Holdings
Performance |
| Timeline |
| Bank of America |
| Equitable Holdings |
Bank of America and Equitable Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Equitable Holdings
The main advantage of trading using opposite Bank of America and Equitable Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Equitable Holdings 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 Equitable Holdings will offset losses from the drop in Equitable Holdings' long position.The idea behind Bank of America and Equitable Holdings 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.| Equitable Holdings vs. Equitable Holdings | Equitable Holdings vs. Athene Holding | Equitable Holdings vs. MetLife Preferred Stock | Equitable Holdings vs. Bank of America |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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