Correlation Between Bank of America and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Bank of America and Summit Materials 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 Summit Materials 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 Summit Materials Cl, you can compare the effects of market volatilities on Bank of America and Summit Materials 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 Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Summit Materials.
Diversification Opportunities for Bank of America and Summit Materials
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Summit is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Summit Materials Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials 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 Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Bank of America i.e., Bank of America and Summit Materials go up and down completely randomly.
Pair Corralation between Bank of America and Summit Materials
Considering the 90-day investment horizon Bank of America is expected to generate 1.0 times less return on investment than Summit Materials. But when comparing it to its historical volatility, Bank of America is 1.22 times less risky than Summit Materials. It trades about 0.26 of its potential returns per unit of risk. Summit Materials Cl is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,565 in Summit Materials Cl on August 28, 2024 and sell it today you would earn a total of 513.00 from holding Summit Materials Cl or generate 11.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Summit Materials Cl
Performance |
| Timeline |
| Bank of America |
| Summit Materials |
Bank of America and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Summit Materials
The main advantage of trading using opposite Bank of America and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Nova |
| Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Hyundai Motor | Summit Materials vs. Toyota Motor Corp |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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