Correlation Between Bank of America and Grupo Profuturo

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Can any of the company-specific risk be diversified away by investing in both Bank of America and Grupo Profuturo 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 Grupo Profuturo 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 Grupo Profuturo SAB, you can compare the effects of market volatilities on Bank of America and Grupo Profuturo 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 Grupo Profuturo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Grupo Profuturo.

Diversification Opportunities for Bank of America and Grupo Profuturo

0.11
  Correlation Coefficient

Average diversification

The 3 months correlation between Bank and Grupo is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Grupo Profuturo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Profuturo SAB 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 Grupo Profuturo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Profuturo SAB has no effect on the direction of Bank of America i.e., Bank of America and Grupo Profuturo go up and down completely randomly.

Pair Corralation between Bank of America and Grupo Profuturo

Assuming the 90 days trading horizon Bank of America is expected to generate 1.3 times more return on investment than Grupo Profuturo. However, Bank of America is 1.3 times more volatile than Grupo Profuturo SAB. It trades about 0.09 of its potential returns per unit of risk. Grupo Profuturo SAB is currently generating about 0.1 per unit of risk. If you would invest  51,831  in Bank of America on December 2, 2024 and sell it today you would earn a total of  42,969  from holding Bank of America or generate 82.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy99.8%
ValuesDaily Returns

Bank of America  vs.  Grupo Profuturo SAB

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Bank of America is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Grupo Profuturo SAB 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Profuturo SAB are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Grupo Profuturo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bank of America and Grupo Profuturo Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and Grupo Profuturo

The main advantage of trading using opposite Bank of America and Grupo Profuturo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Grupo Profuturo 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 Grupo Profuturo will offset losses from the drop in Grupo Profuturo's long position.
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The idea behind Bank of America and Grupo Profuturo SAB 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.
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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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