Correlation Between Bank of America and United Natural
Can any of the company-specific risk be diversified away by investing in both Bank of America and United Natural 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 United Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and United Natural Foods, you can compare the effects of market volatilities on Bank of America and United Natural 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 United Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and United Natural.
Diversification Opportunities for Bank of America and United Natural
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and United is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and United Natural Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Natural Foods 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 United Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Natural Foods has no effect on the direction of Bank of America i.e., Bank of America and United Natural go up and down completely randomly.
Pair Corralation between Bank of America and United Natural
Assuming the 90 days trading horizon Bank of America is expected to generate 2.56 times less return on investment than United Natural. But when comparing it to its historical volatility, Verizon Communications is 2.16 times less risky than United Natural. It trades about 0.32 of its potential returns per unit of risk. United Natural Foods is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 1,820 in United Natural Foods on August 29, 2024 and sell it today you would earn a total of 478.00 from holding United Natural Foods or generate 26.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. United Natural Foods
Performance |
| Timeline |
| Verizon Communications |
| United Natural Foods |
Bank of America and United Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and United Natural
The main advantage of trading using opposite Bank of America and United Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, United Natural 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 United Natural will offset losses from the drop in United Natural's long position.| Bank of America vs. Apple Inc | Bank of America vs. Apple Inc | Bank of America vs. Superior Plus Corp | Bank of America vs. SIVERS SEMICONDUCTORS AB |
| United Natural vs. Superior Plus Corp | United Natural vs. SIVERS SEMICONDUCTORS AB | United Natural vs. Talanx AG | United Natural vs. 2G ENERGY |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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