Correlation Between Bank of America and Freedom 100
Can any of the company-specific risk be diversified away by investing in both Bank of America and Freedom 100 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 Freedom 100 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 Freedom 100 Emerging, you can compare the effects of market volatilities on Bank of America and Freedom 100 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 Freedom 100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Freedom 100.
Diversification Opportunities for Bank of America and Freedom 100
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Freedom is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Freedom 100 Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom 100 Emerging 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 Freedom 100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom 100 Emerging has no effect on the direction of Bank of America i.e., Bank of America and Freedom 100 go up and down completely randomly.
Pair Corralation between Bank of America and Freedom 100
Considering the 90-day investment horizon Bank of America is expected to generate 1.41 times more return on investment than Freedom 100. However, Bank of America is 1.41 times more volatile than Freedom 100 Emerging. It trades about 0.06 of its potential returns per unit of risk. Freedom 100 Emerging is currently generating about 0.05 per unit of risk. If you would invest 3,079 in Bank of America on August 30, 2024 and sell it today you would earn a total of 1,698 from holding Bank of America or generate 55.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Freedom 100 Emerging
Performance |
| Timeline |
| Bank of America |
| Freedom 100 Emerging |
Bank of America and Freedom 100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Freedom 100
The main advantage of trading using opposite Bank of America and Freedom 100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Freedom 100 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 Freedom 100 will offset losses from the drop in Freedom 100'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 |
| Freedom 100 vs. Horizon Kinetics Inflation | Freedom 100 vs. iShares MSCI Emerging | Freedom 100 vs. iShares Emerging Markets | Freedom 100 vs. WisdomTree International High |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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