Correlation Between Bank of America and Aggressive Investors
Can any of the company-specific risk be diversified away by investing in both Bank of America and Aggressive Investors 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 Aggressive Investors 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 Aggressive Investors 1, you can compare the effects of market volatilities on Bank of America and Aggressive Investors 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 Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Aggressive Investors.
Diversification Opportunities for Bank of America and Aggressive Investors
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Aggressive is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors 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 Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Bank of America i.e., Bank of America and Aggressive Investors go up and down completely randomly.
Pair Corralation between Bank of America and Aggressive Investors
Considering the 90-day investment horizon Bank of America is expected to under-perform the Aggressive Investors. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.2 times less risky than Aggressive Investors. The stock trades about -0.31 of its potential returns per unit of risk. The Aggressive Investors 1 is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 9,985 in Aggressive Investors 1 on November 27, 2024 and sell it today you would lose (49.00) from holding Aggressive Investors 1 or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Aggressive Investors 1
Performance |
| Timeline |
| Bank of America |
| Aggressive Investors |
Bank of America and Aggressive Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Aggressive Investors
The main advantage of trading using opposite Bank of America and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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