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
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and First is 0.57. 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
If you would invest 4,182 in Bank of America on September 1, 2024 and sell it today you would earn a total of 569.00 from holding Bank of America or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| 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. Citigroup | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of | Bank of America vs. JPMorgan Chase Co |
| First American vs. Barings Emerging Markets | First American vs. Sp Midcap Index | First American vs. Goldman Sachs Emerging | First American vs. Vanguard Developed Markets |
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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