Correlation Between Bank of America and First American
Can any of the company-specific risk be diversified away by investing in both Bank of America and First American 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 First American 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 First American Funds, you can compare the effects of market volatilities on Bank of America and First American 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 First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and First American.
Diversification Opportunities for Bank of America and First American
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds 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 First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Bank of America i.e., Bank of America and First American go up and down completely randomly.
Pair Corralation between Bank of America and First American
Considering the 90-day investment horizon Bank of America is expected to generate 10.11 times more return on investment than First American. However, Bank of America is 10.11 times more volatile than First American Funds. It trades about 0.1 of its potential returns per unit of risk. First American Funds is currently generating about 0.16 per unit of risk. If you would invest 3,883 in Bank of America on August 25, 2024 and sell it today you would earn a total of 817.00 from holding Bank of America or generate 21.04% 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. First American Funds
Performance |
| Timeline |
| Bank of America |
| First American Funds |
Bank of America and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and First American
The main advantage of trading using opposite Bank of America and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, First American 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 First American will offset losses from the drop in First American'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 |
| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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