Correlation Between Bank of America and Bank of Communications Co
Can any of the company-specific risk be diversified away by investing in both Bank of America and Bank of Communications Co 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 Bank of Communications Co 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 Bank of Communications, you can compare the effects of market volatilities on Bank of America and Bank of Communications Co 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 Bank of Communications Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Bank of Communications Co.
Diversification Opportunities for Bank of America and Bank of Communications Co
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Bank is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Bank of Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Communications Co 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 Bank of Communications Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Communications Co has no effect on the direction of Bank of America i.e., Bank of America and Bank of Communications Co go up and down completely randomly.
Pair Corralation between Bank of America and Bank of Communications Co
Assuming the 90 days trading horizon Bank of America is expected to generate 0.28 times more return on investment than Bank of Communications Co. However, Bank of America is 3.6 times less risky than Bank of Communications Co. It trades about -0.04 of its potential returns per unit of risk. Bank of Communications is currently generating about -0.12 per unit of risk. If you would invest 2,159 in Bank of America on September 1, 2024 and sell it today you would lose (19.00) from holding Bank of America or give up 0.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Bank of Communications
Performance |
| Timeline |
| Bank of America |
| Bank of Communications Co |
Bank of America and Bank of Communications Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Bank of Communications Co
The main advantage of trading using opposite Bank of America and Bank of Communications Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Bank of Communications Co 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 Bank of Communications Co will offset losses from the drop in Bank of Communications Co's long position.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. JPMorgan Chase Co | Bank of America vs. Wells Fargo | Bank of America vs. Wells Fargo |
| Bank of Communications Co vs. Bank of America | Bank of Communications Co vs. Bank of America | Bank of Communications Co vs. Bank of America | Bank of Communications Co vs. China Construction Bank |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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