Correlation Between Bank of America and Apple
Can any of the company-specific risk be diversified away by investing in both Bank of America and Apple 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 Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verizon Communications and Apple Inc, you can compare the effects of market volatilities on Bank of America and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Apple.
Diversification Opportunities for Bank of America and Apple
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Apple is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Bank of America i.e., Bank of America and Apple go up and down completely randomly.
Pair Corralation between Bank of America and Apple
Assuming the 90 days trading horizon Bank of America is expected to generate 2.53 times less return on investment than Apple. In addition to that, Bank of America is 1.2 times more volatile than Apple Inc. It trades about 0.2 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.6 per unit of volatility. If you would invest 20,880 in Apple Inc on September 12, 2024 and sell it today you would earn a total of 2,835 from holding Apple Inc or generate 13.58% 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. Apple Inc
Performance |
| Timeline |
| Verizon Communications |
| Apple Inc |
Bank of America and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Apple
The main advantage of trading using opposite Bank of America and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| Bank of America vs. Tencent Music Entertainment | Bank of America vs. ADRIATIC METALS LS 013355 | Bank of America vs. MAGIC SOFTWARE ENTR | Bank of America vs. MCEWEN MINING INC |
| Apple vs. ON SEMICONDUCTOR | Apple vs. Burlington Stores | Apple vs. National Retail Properties | Apple vs. Goosehead Insurance |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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