Correlation Between Bank of America and BAE Systems
Can any of the company-specific risk be diversified away by investing in both Bank of America and BAE Systems 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 BAE Systems 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 BAE Systems plc, you can compare the effects of market volatilities on Bank of America and BAE Systems 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 BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and BAE Systems.
Diversification Opportunities for Bank of America and BAE Systems
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and BAE is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and BAE Systems plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems plc 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 BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems plc has no effect on the direction of Bank of America i.e., Bank of America and BAE Systems go up and down completely randomly.
Pair Corralation between Bank of America and BAE Systems
Considering the 90-day investment horizon Bank of America is expected to generate 1.05 times more return on investment than BAE Systems. However, Bank of America is 1.05 times more volatile than BAE Systems plc. It trades about 0.24 of its potential returns per unit of risk. BAE Systems plc is currently generating about 0.08 per unit of risk. If you would invest 4,262 in Bank of America on August 27, 2024 and sell it today you would earn a total of 438.00 from holding Bank of America or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. BAE Systems plc
Performance |
| Timeline |
| Bank of America |
| BAE Systems plc |
Bank of America and BAE Systems Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and BAE Systems
The main advantage of trading using opposite Bank of America and BAE Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, BAE Systems 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 BAE Systems will offset losses from the drop in BAE Systems' long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
| BAE Systems vs. Automatic Data Processing | BAE Systems vs. Zoom Video Communications | BAE Systems vs. Gamma Communications PLC | BAE Systems vs. Ross Stores |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |