Correlation Between Bank of America and SPASX 200
Can any of the company-specific risk be diversified away by investing in both Bank of America and SPASX 200 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 SPASX 200 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 SPASX 200 VIX, you can compare the effects of market volatilities on Bank of America and SPASX 200 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 SPASX 200. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SPASX 200.
Diversification Opportunities for Bank of America and SPASX 200
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and SPASX is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SPASX 200 VIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPASX 200 VIX 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 SPASX 200. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPASX 200 VIX has no effect on the direction of Bank of America i.e., Bank of America and SPASX 200 go up and down completely randomly.
Pair Corralation between Bank of America and SPASX 200
Considering the 90-day investment horizon Bank of America is expected to generate 2.29 times less return on investment than SPASX 200. But when comparing it to its historical volatility, Bank of America is 6.1 times less risky than SPASX 200. It trades about 0.1 of its potential returns per unit of risk. SPASX 200 VIX is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,136 in SPASX 200 VIX on September 1, 2024 and sell it today you would lose (55.00) from holding SPASX 200 VIX or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 96.92% |
| Values | Daily Returns |
Bank of America vs. SPASX 200 VIX
Performance |
| Timeline |
Bank of America and SPASX 200 Volatility Contrast
Predicted Return Density |
| Returns |
Bank of America
Pair trading matchups for Bank of America
SPASX 200 VIX
Pair trading matchups for SPASX 200
Pair Trading with Bank of America and SPASX 200
The main advantage of trading using opposite Bank of America and SPASX 200 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SPASX 200 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 SPASX 200 will offset losses from the drop in SPASX 200's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| SPASX 200 vs. Alto Metals | SPASX 200 vs. Dicker Data | SPASX 200 vs. Wt Financial Group | SPASX 200 vs. Auswide Bank |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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