Correlation Between Bank of America and Digital Realty
Can any of the company-specific risk be diversified away by investing in both Bank of America and Digital Realty 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 Digital Realty 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 Digital Realty Trust, you can compare the effects of market volatilities on Bank of America and Digital Realty 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 Digital Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Digital Realty.
Diversification Opportunities for Bank of America and Digital Realty
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Digital is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Digital Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Realty Trust 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 Digital Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Realty Trust has no effect on the direction of Bank of America i.e., Bank of America and Digital Realty go up and down completely randomly.
Pair Corralation between Bank of America and Digital Realty
Considering the 90-day investment horizon Bank of America is expected to generate 1.14 times more return on investment than Digital Realty. However, Bank of America is 1.14 times more volatile than Digital Realty Trust. It trades about 0.32 of its potential returns per unit of risk. Digital Realty Trust is currently generating about 0.19 per unit of risk. If you would invest 4,391 in Bank of America on October 30, 2024 and sell it today you would earn a total of 332.00 from holding Bank of America or generate 7.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 94.74% |
Values | Daily Returns |
Bank of America vs. Digital Realty Trust
Performance |
Timeline |
Bank of America |
Digital Realty Trust |
Bank of America and Digital Realty Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Digital Realty
The main advantage of trading using opposite Bank of America and Digital Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Digital Realty 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 Digital Realty will offset losses from the drop in Digital Realty's long position.Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC |
Digital Realty vs. Digital Realty Trust | Digital Realty vs. EPR Properties Series | Digital Realty vs. EPR Properties | Digital Realty vs. EPR Properties |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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