Correlation Between Bank of America and DBS Group
Can any of the company-specific risk be diversified away by investing in both Bank of America and DBS 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 DBS 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 DBS Group Holdings, you can compare the effects of market volatilities on Bank of America and DBS 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 DBS Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and DBS Group.
Diversification Opportunities for Bank of America and DBS Group
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and DBS is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and DBS Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS Group Holdings 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 DBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS Group Holdings has no effect on the direction of Bank of America i.e., Bank of America and DBS Group go up and down completely randomly.
Pair Corralation between Bank of America and DBS Group
Considering the 90-day investment horizon Bank of America is expected to generate 1.33 times less return on investment than DBS Group. But when comparing it to its historical volatility, Bank of America is 1.81 times less risky than DBS Group. It trades about 0.06 of its potential returns per unit of risk. DBS Group Holdings is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,937 in DBS Group Holdings on August 30, 2024 and sell it today you would earn a total of 1,149 from holding DBS Group Holdings or generate 59.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. DBS Group Holdings
Performance |
| Timeline |
| Bank of America |
| DBS Group Holdings |
Bank of America and DBS Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and DBS Group
The main advantage of trading using opposite Bank of America and DBS Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, DBS 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 DBS Group will offset losses from the drop in DBS Group's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
| DBS Group vs. United Overseas Bank | DBS Group vs. KBC Groep NV | DBS Group vs. Overseas Chinese Banking | DBS Group vs. China Minsh |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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