Correlation Between Bank of America and Baxter International
Can any of the company-specific risk be diversified away by investing in both Bank of America and Baxter International 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 Baxter International 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 Baxter International, you can compare the effects of market volatilities on Bank of America and Baxter International 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 Baxter International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Baxter International.
Diversification Opportunities for Bank of America and Baxter International
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Baxter is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Baxter International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baxter International 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 Baxter International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baxter International has no effect on the direction of Bank of America i.e., Bank of America and Baxter International go up and down completely randomly.
Pair Corralation between Bank of America and Baxter International
Considering the 90-day investment horizon Bank of America is expected to generate 1.02 times more return on investment than Baxter International. However, Bank of America is 1.02 times more volatile than Baxter International. It trades about 0.27 of its potential returns per unit of risk. Baxter International is currently generating about -0.17 per unit of risk. If you would invest 4,253 in Bank of America on August 30, 2024 and sell it today you would earn a total of 524.00 from holding Bank of America or generate 12.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 82.61% |
| Values | Daily Returns |
Bank of America vs. Baxter International
Performance |
| Timeline |
| Bank of America |
| Baxter International |
Bank of America and Baxter International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Baxter International
The main advantage of trading using opposite Bank of America and Baxter International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Baxter International 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 Baxter International will offset losses from the drop in Baxter International's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings |
| Baxter International vs. Fleury SA | Baxter International vs. Baumer SA | Baxter International vs. Energisa SA | Baxter International vs. BTG Pactual Logstica |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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