Correlation Between Bank of America and New York
Can any of the company-specific risk be diversified away by investing in both Bank of America and New York 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 New York into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and The New York, you can compare the effects of market volatilities on Bank of America and New York 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 New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and New York.
Diversification Opportunities for Bank of America and New York
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and New is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and The New York in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York 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 Verizon Communications are associated (or correlated) with New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York has no effect on the direction of Bank of America i.e., Bank of America and New York go up and down completely randomly.
Pair Corralation between Bank of America and New York
Assuming the 90 days trading horizon Bank of America is expected to generate 1.97 times less return on investment than New York. But when comparing it to its historical volatility, Verizon Communications is 1.12 times less risky than New York. It trades about 0.07 of its potential returns per unit of risk. The New York is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,945 in The New York on September 3, 2024 and sell it today you would earn a total of 1,191 from holding The New York or generate 30.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. The New York
Performance |
| Timeline |
| Verizon Communications |
| New York |
Bank of America and New York Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and New York
The main advantage of trading using opposite Bank of America and New York positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, New York 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 New York will offset losses from the drop in New York's long position.| Bank of America vs. CAL MAINE FOODS | Bank of America vs. GEELY AUTOMOBILE | Bank of America vs. Nomad Foods | Bank of America vs. NISSIN FOODS HLDGS |
| New York vs. COMBA TELECOM SYST | New York vs. Entravision Communications | New York vs. United Natural Foods | New York vs. CN MODERN DAIRY |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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