Correlation Between Bank of America and Wilshire Large
Can any of the company-specific risk be diversified away by investing in both Bank of America and Wilshire Large 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 Wilshire Large 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 Wilshire Large, you can compare the effects of market volatilities on Bank of America and Wilshire Large 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 Wilshire Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Wilshire Large.
Diversification Opportunities for Bank of America and Wilshire Large
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Wilshire is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Wilshire Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilshire Large 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 Wilshire Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilshire Large has no effect on the direction of Bank of America i.e., Bank of America and Wilshire Large go up and down completely randomly.
Pair Corralation between Bank of America and Wilshire Large
Considering the 90-day investment horizon Bank of America is expected to generate 1.52 times less return on investment than Wilshire Large. In addition to that, Bank of America is 1.48 times more volatile than Wilshire Large. It trades about 0.06 of its total potential returns per unit of risk. Wilshire Large is currently generating about 0.13 per unit of volatility. If you would invest 2,537 in Wilshire Large on August 28, 2024 and sell it today you would earn a total of 2,219 from holding Wilshire Large or generate 87.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Wilshire Large
Performance |
| Timeline |
| Bank of America |
| Wilshire Large |
Bank of America and Wilshire Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Wilshire Large
The main advantage of trading using opposite Bank of America and Wilshire Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Wilshire Large 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 Wilshire Large will offset losses from the drop in Wilshire Large's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Nova |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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