Correlation Between Bank of America and Capital Group
Can any of the company-specific risk be diversified away by investing in both Bank of America and Capital Group 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 Capital Group 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 Capital Group Fixed, you can compare the effects of market volatilities on Bank of America and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Capital Group.
Diversification Opportunities for Bank of America and Capital Group
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Capital is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Capital Group Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Fixed 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 Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Fixed has no effect on the direction of Bank of America i.e., Bank of America and Capital Group go up and down completely randomly.
Pair Corralation between Bank of America and Capital Group
Considering the 90-day investment horizon Bank of America is expected to generate 56.89 times less return on investment than Capital Group. But when comparing it to its historical volatility, Bank of America is 66.46 times less risky than Capital Group. It trades about 0.11 of its potential returns per unit of risk. Capital Group Fixed is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Capital Group Fixed on August 25, 2024 and sell it today you would earn a total of 2,526 from holding Capital Group Fixed or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 46.72% |
| Values | Daily Returns |
Bank of America vs. Capital Group Fixed
Performance |
| Timeline |
| Bank of America |
| Capital Group Fixed |
Bank of America and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Capital Group
The main advantage of trading using opposite Bank of America and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Capital Group vs. Tidal Trust II | Capital Group vs. Tidal Trust II | Capital Group vs. First Trust Dorsey | Capital Group vs. Direxion Daily META |
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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