Correlation Between Bank of America and Better World
Can any of the company-specific risk be diversified away by investing in both Bank of America and Better World 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 Better World 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 Better World Acquisition, you can compare the effects of market volatilities on Bank of America and Better World 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 Better World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Better World.
Diversification Opportunities for Bank of America and Better World
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Better is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Better World Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Better World Acquisition 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 Better World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Better World Acquisition has no effect on the direction of Bank of America i.e., Bank of America and Better World go up and down completely randomly.
Pair Corralation between Bank of America and Better World
Considering the 90-day investment horizon Bank of America is expected to generate 1.59 times more return on investment than Better World. However, Bank of America is 1.59 times more volatile than Better World Acquisition. It trades about 0.06 of its potential returns per unit of risk. Better World Acquisition is currently generating about -0.03 per unit of risk. If you would invest 3,278 in Bank of America on September 3, 2024 and sell it today you would earn a total of 1,426 from holding Bank of America or generate 43.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 27.79% |
| Values | Daily Returns |
Bank of America vs. Better World Acquisition
Performance |
| Timeline |
| Bank of America |
| Better World Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank of America and Better World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Better World
The main advantage of trading using opposite Bank of America and Better World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Better World 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 Better World will offset losses from the drop in Better World's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| Better World vs. Biglari Holdings | Better World vs. Kura Sushi USA | Better World vs. Iridium Communications | Better World vs. First Watch Restaurant |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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