Correlation Between Bank of America and Xtrackers ShortDAX
Can any of the company-specific risk be diversified away by investing in both Bank of America and Xtrackers ShortDAX 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 Xtrackers ShortDAX 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 Xtrackers ShortDAX, you can compare the effects of market volatilities on Bank of America and Xtrackers ShortDAX 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 Xtrackers ShortDAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Xtrackers ShortDAX.
Diversification Opportunities for Bank of America and Xtrackers ShortDAX
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Xtrackers is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Xtrackers ShortDAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers ShortDAX 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 Xtrackers ShortDAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers ShortDAX has no effect on the direction of Bank of America i.e., Bank of America and Xtrackers ShortDAX go up and down completely randomly.
Pair Corralation between Bank of America and Xtrackers ShortDAX
Considering the 90-day investment horizon Bank of America is expected to generate 1.38 times more return on investment than Xtrackers ShortDAX. However, Bank of America is 1.38 times more volatile than Xtrackers ShortDAX. It trades about 0.21 of its potential returns per unit of risk. Xtrackers ShortDAX is currently generating about 0.12 per unit of risk. If you would invest 4,234 in Bank of America on August 24, 2024 and sell it today you would earn a total of 412.00 from holding Bank of America or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. Xtrackers ShortDAX
Performance |
| Timeline |
| Bank of America |
| Xtrackers ShortDAX |
Bank of America and Xtrackers ShortDAX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Xtrackers ShortDAX
The main advantage of trading using opposite Bank of America and Xtrackers ShortDAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Xtrackers ShortDAX 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 Xtrackers ShortDAX will offset losses from the drop in Xtrackers ShortDAX's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Xtrackers ShortDAX vs. Xtrackers II Global | Xtrackers ShortDAX vs. Xtrackers FTSE | Xtrackers ShortDAX vs. Xtrackers SP 500 | Xtrackers ShortDAX vs. Xtrackers MSCI |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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