Correlation Between Bank of America and Federal Hme
Can any of the company-specific risk be diversified away by investing in both Bank of America and Federal Hme 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 Federal Hme 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 Federal Hme 655, you can compare the effects of market volatilities on Bank of America and Federal Hme 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 Federal Hme. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Federal Hme.
Diversification Opportunities for Bank of America and Federal Hme
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Federal is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Federal Hme 655 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Hme 655 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 Federal Hme. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Hme 655 has no effect on the direction of Bank of America i.e., Bank of America and Federal Hme go up and down completely randomly.
Pair Corralation between Bank of America and Federal Hme
Considering the 90-day investment horizon Bank of America is expected to generate 8.48 times less return on investment than Federal Hme. But when comparing it to its historical volatility, Bank of America is 7.97 times less risky than Federal Hme. It trades about 0.27 of its potential returns per unit of risk. Federal Hme 655 is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 378.00 in Federal Hme 655 on August 29, 2024 and sell it today you would earn a total of 447.00 from holding Federal Hme 655 or generate 118.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. Federal Hme 655
Performance |
| Timeline |
| Bank of America |
| Federal Hme 655 |
Bank of America and Federal Hme Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Federal Hme
The main advantage of trading using opposite Bank of America and Federal Hme positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Federal Hme 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 Federal Hme will offset losses from the drop in Federal Hme'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 |
| Federal Hme vs. Federal Home Loan | Federal Hme vs. Federal Home Loan | Federal Hme vs. Federal Home Loan | Federal Hme vs. Federal National Mortgage |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Stocks Directory Find actively traded stocks across global markets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |