Correlation Between Bank of America and Vanguard Intermediate
Can any of the company-specific risk be diversified away by investing in both Bank of America and Vanguard Intermediate 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 Vanguard Intermediate 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 Vanguard Intermediate Term Bond, you can compare the effects of market volatilities on Bank of America and Vanguard Intermediate 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 Vanguard Intermediate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Vanguard Intermediate.
Diversification Opportunities for Bank of America and Vanguard Intermediate
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Vanguard is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Vanguard Intermediate Term Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Intermediate 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 Vanguard Intermediate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Intermediate has no effect on the direction of Bank of America i.e., Bank of America and Vanguard Intermediate go up and down completely randomly.
Pair Corralation between Bank of America and Vanguard Intermediate
Considering the 90-day investment horizon Bank of America is expected to generate 3.67 times more return on investment than Vanguard Intermediate. However, Bank of America is 3.67 times more volatile than Vanguard Intermediate Term Bond. It trades about 0.14 of its potential returns per unit of risk. Vanguard Intermediate Term Bond is currently generating about 0.24 per unit of risk. If you would invest 4,621 in Bank of America on November 9, 2024 and sell it today you would earn a total of 153.00 from holding Bank of America or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Vanguard Intermediate Term Bon
Performance |
| Timeline |
| Bank of America |
| Vanguard Intermediate |
Bank of America and Vanguard Intermediate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Vanguard Intermediate
The main advantage of trading using opposite Bank of America and Vanguard Intermediate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Vanguard Intermediate 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 Vanguard Intermediate will offset losses from the drop in Vanguard Intermediate's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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