Correlation Between Bank of America and Growth Allocation
Can any of the company-specific risk be diversified away by investing in both Bank of America and Growth Allocation 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 Growth Allocation 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 Growth Allocation Index, you can compare the effects of market volatilities on Bank of America and Growth Allocation 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 Growth Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Growth Allocation.
Diversification Opportunities for Bank of America and Growth Allocation
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Growth is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Growth Allocation Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Allocation Index 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 Growth Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Allocation Index has no effect on the direction of Bank of America i.e., Bank of America and Growth Allocation go up and down completely randomly.
Pair Corralation between Bank of America and Growth Allocation
Considering the 90-day investment horizon Bank of America is expected to generate 2.72 times more return on investment than Growth Allocation. However, Bank of America is 2.72 times more volatile than Growth Allocation Index. It trades about 0.05 of its potential returns per unit of risk. Growth Allocation Index is currently generating about 0.1 per unit of risk. If you would invest 3,278 in Bank of America on August 24, 2024 and sell it today you would earn a total of 1,422 from holding Bank of America or generate 43.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Growth Allocation Index
Performance |
| Timeline |
| Bank of America |
| Growth Allocation Index |
Bank of America and Growth Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Growth Allocation
The main advantage of trading using opposite Bank of America and Growth Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Growth Allocation 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 Growth Allocation will offset losses from the drop in Growth Allocation'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 |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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