Correlation Between Bank of America and Grayscale Digital
Can any of the company-specific risk be diversified away by investing in both Bank of America and Grayscale Digital 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 Grayscale Digital 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 Grayscale Digital Large, you can compare the effects of market volatilities on Bank of America and Grayscale Digital 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 Grayscale Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Grayscale Digital.
Diversification Opportunities for Bank of America and Grayscale Digital
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Grayscale is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Grayscale Digital Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Digital Large 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 Grayscale Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Digital Large has no effect on the direction of Bank of America i.e., Bank of America and Grayscale Digital go up and down completely randomly.
Pair Corralation between Bank of America and Grayscale Digital
Considering the 90-day investment horizon Bank of America is expected to generate 4.09 times less return on investment than Grayscale Digital. But when comparing it to its historical volatility, Bank of America is 2.94 times less risky than Grayscale Digital. It trades about 0.1 of its potential returns per unit of risk. Grayscale Digital Large is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 595.00 in Grayscale Digital Large on September 2, 2024 and sell it today you would earn a total of 3,635 from holding Grayscale Digital Large or generate 610.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Grayscale Digital Large
Performance |
| Timeline |
| Bank of America |
| Grayscale Digital Large |
Bank of America and Grayscale Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Grayscale Digital
The main advantage of trading using opposite Bank of America and Grayscale Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Grayscale Digital 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 Grayscale Digital will offset losses from the drop in Grayscale Digital's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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