Correlation Between Bank of America and International Stock
Can any of the company-specific risk be diversified away by investing in both Bank of America and International Stock 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 International Stock 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 International Stock Fund, you can compare the effects of market volatilities on Bank of America and International Stock 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 International Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and International Stock.
Diversification Opportunities for Bank of America and International Stock
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and International is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and International Stock Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Stock 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 International Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Stock has no effect on the direction of Bank of America i.e., Bank of America and International Stock go up and down completely randomly.
Pair Corralation between Bank of America and International Stock
Considering the 90-day investment horizon Bank of America is expected to generate 2.18 times more return on investment than International Stock. However, Bank of America is 2.18 times more volatile than International Stock Fund. It trades about 0.26 of its potential returns per unit of risk. International Stock Fund is currently generating about -0.24 per unit of risk. If you would invest 3,968 in Bank of America on August 29, 2024 and sell it today you would earn a total of 817.50 from holding Bank of America or generate 20.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. International Stock Fund
Performance |
| Timeline |
| Bank of America |
| International Stock |
Bank of America and International Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and International Stock
The main advantage of trading using opposite Bank of America and International Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, International Stock 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 International Stock will offset losses from the drop in International Stock'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 |
| International Stock vs. Mid Cap Value Profund | International Stock vs. Lord Abbett Small | International Stock vs. Ultrasmall Cap Profund Ultrasmall Cap | International Stock vs. Boston Partners Small |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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