Correlation Between Bank of America and HCI
Can any of the company-specific risk be diversified away by investing in both Bank of America and HCI 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 HCI 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 HCI Group, you can compare the effects of market volatilities on Bank of America and HCI 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 HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and HCI.
Diversification Opportunities for Bank of America and HCI
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and HCI is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group 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 HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Bank of America i.e., Bank of America and HCI go up and down completely randomly.
Pair Corralation between Bank of America and HCI
Considering the 90-day investment horizon Bank of America is expected to generate 1.02 times more return on investment than HCI. However, Bank of America is 1.02 times more volatile than HCI Group. It trades about 0.22 of its potential returns per unit of risk. HCI Group is currently generating about -0.16 per unit of risk. If you would invest 4,265 in Bank of America on August 25, 2024 and sell it today you would earn a total of 435.00 from holding Bank of America or generate 10.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. HCI Group
Performance |
| Timeline |
| Bank of America |
| HCI Group |
Bank of America and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and HCI
The main advantage of trading using opposite Bank of America and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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