Correlation Between Bank of America and WEC Energy
Can any of the company-specific risk be diversified away by investing in both Bank of America and WEC Energy 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 WEC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and WEC Energy Group, you can compare the effects of market volatilities on Bank of America and WEC Energy 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 WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and WEC Energy.
Diversification Opportunities for Bank of America and WEC Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and WEC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Bank of America i.e., Bank of America and WEC Energy go up and down completely randomly.
Pair Corralation between Bank of America and WEC Energy
Assuming the 90 days trading horizon Verizon Communications is expected to generate 1.0 times more return on investment than WEC Energy. However, Verizon Communications is 1.0 times less risky than WEC Energy. It trades about 0.2 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.07 per unit of risk. If you would invest 3,816 in Verizon Communications on September 12, 2024 and sell it today you would earn a total of 200.00 from holding Verizon Communications or generate 5.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. WEC Energy Group
Performance |
| Timeline |
| Verizon Communications |
| WEC Energy Group |
Bank of America and WEC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and WEC Energy
The main advantage of trading using opposite Bank of America and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, WEC Energy 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 WEC Energy will offset losses from the drop in WEC Energy's long position.| Bank of America vs. LION ONE METALS | Bank of America vs. ARDAGH METAL PACDL 0001 | Bank of America vs. BE Semiconductor Industries | Bank of America vs. GALENA MINING LTD |
| WEC Energy vs. Nippon Steel | WEC Energy vs. ALGOMA STEEL GROUP | WEC Energy vs. ITALIAN WINE BRANDS | WEC Energy vs. RELIANCE STEEL AL |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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