Correlation Between Bank of America and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Bank of America and Sterling Capital 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 Sterling Capital 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 Sterling Capital Ultra, you can compare the effects of market volatilities on Bank of America and Sterling Capital 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 Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Sterling Capital.
Diversification Opportunities for Bank of America and Sterling Capital
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Sterling is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Sterling Capital Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Ultra 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 Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Ultra has no effect on the direction of Bank of America i.e., Bank of America and Sterling Capital go up and down completely randomly.
Pair Corralation between Bank of America and Sterling Capital
Considering the 90-day investment horizon Bank of America is expected to generate 17.54 times more return on investment than Sterling Capital. However, Bank of America is 17.54 times more volatile than Sterling Capital Ultra. It trades about 0.05 of its potential returns per unit of risk. Sterling Capital Ultra is currently generating about 0.24 per unit of risk. If you would invest 3,397 in Bank of America on September 1, 2024 and sell it today you would earn a total of 1,354 from holding Bank of America or generate 39.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.78% |
| Values | Daily Returns |
Bank of America vs. Sterling Capital Ultra
Performance |
| Timeline |
| Bank of America |
| Sterling Capital Ultra |
Bank of America and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Sterling Capital
The main advantage of trading using opposite Bank of America and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital'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 |
| Sterling Capital vs. Sterling Capital Total | Sterling Capital vs. Sterling Capital Total | Sterling Capital vs. Sterling Capital Total | Sterling Capital vs. Sterling Capital Intermediate |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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