Correlation Between Bank of America and CGI
Can any of the company-specific risk be diversified away by investing in both Bank of America and CGI 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 CGI 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 CGI Inc, you can compare the effects of market volatilities on Bank of America and CGI 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 CGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and CGI.
Diversification Opportunities for Bank of America and CGI
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and CGI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc 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 CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of Bank of America i.e., Bank of America and CGI go up and down completely randomly.
Pair Corralation between Bank of America and CGI
Considering the 90-day investment horizon Bank of America is expected to generate 2.65 times less return on investment than CGI. In addition to that, Bank of America is 1.07 times more volatile than CGI Inc. It trades about 0.15 of its total potential returns per unit of risk. CGI Inc is currently generating about 0.41 per unit of volatility. If you would invest 10,826 in CGI Inc on November 8, 2024 and sell it today you would earn a total of 1,092 from holding CGI Inc or generate 10.09% 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. CGI Inc
Performance |
| Timeline |
| Bank of America |
| CGI Inc |
Bank of America and CGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and CGI
The main advantage of trading using opposite Bank of America and CGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, CGI 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 CGI will offset losses from the drop in CGI's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Canadian Imperial Bank | Bank of America vs. Bank of Montreal |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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