Correlation Between Bank of America and Alger Growth
Can any of the company-specific risk be diversified away by investing in both Bank of America and Alger Growth 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 Alger Growth 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 Alger Growth Income, you can compare the effects of market volatilities on Bank of America and Alger Growth 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 Alger Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Alger Growth.
Diversification Opportunities for Bank of America and Alger Growth
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Alger is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Alger Growth Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alger Growth Income 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 Alger Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alger Growth Income has no effect on the direction of Bank of America i.e., Bank of America and Alger Growth go up and down completely randomly.
Pair Corralation between Bank of America and Alger Growth
Considering the 90-day investment horizon Bank of America is expected to generate 2.02 times more return on investment than Alger Growth. However, Bank of America is 2.02 times more volatile than Alger Growth Income. It trades about 0.1 of its potential returns per unit of risk. Alger Growth Income is currently generating about 0.12 per unit of risk. If you would invest 2,820 in Bank of America on August 31, 2024 and sell it today you would earn a total of 1,931 from holding Bank of America or generate 68.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Bank of America vs. Alger Growth Income
Performance |
| Timeline |
| Bank of America |
| Alger Growth Income |
Bank of America and Alger Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Alger Growth
The main advantage of trading using opposite Bank of America and Alger Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Alger Growth 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 Alger Growth will offset losses from the drop in Alger Growth's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Alger Growth vs. Aquagold International | Alger Growth vs. Morningstar Unconstrained Allocation | Alger Growth vs. Thrivent High Yield | Alger Growth vs. Via Renewables |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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