Correlation Between Bank of America and First Trust
Can any of the company-specific risk be diversified away by investing in both Bank of America and First Trust 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 Trust 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 Trust Health, you can compare the effects of market volatilities on Bank of America and First Trust 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 Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and First Trust.
Diversification Opportunities for Bank of America and First Trust
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and First is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and First Trust Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Health 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 Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Health has no effect on the direction of Bank of America i.e., Bank of America and First Trust go up and down completely randomly.
Pair Corralation between Bank of America and First Trust
Considering the 90-day investment horizon Bank of America is expected to generate 2.04 times more return on investment than First Trust. However, Bank of America is 2.04 times more volatile than First Trust Health. It trades about 0.27 of its potential returns per unit of risk. First Trust Health is currently generating about 0.16 per unit of risk. If you would invest 4,262 in Bank of America on August 29, 2024 and sell it today you would earn a total of 513.00 from holding Bank of America or generate 12.04% 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. First Trust Health
Performance |
| Timeline |
| Bank of America |
| First Trust Health |
Bank of America and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and First Trust
The main advantage of trading using opposite Bank of America and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, First Trust 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 Trust will offset losses from the drop in First Trust's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Nova |
| First Trust vs. First Trust Consumer | First Trust vs. First Trust Consumer | First Trust vs. First Trust Technology | First Trust vs. First Trust Financials |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |