Correlation Between Bank of America and BetaPro SP
Can any of the company-specific risk be diversified away by investing in both Bank of America and BetaPro SP 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 BetaPro SP 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 BetaPro SP TSX, you can compare the effects of market volatilities on Bank of America and BetaPro SP 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 BetaPro SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and BetaPro SP.
Diversification Opportunities for Bank of America and BetaPro SP
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and BetaPro is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and BetaPro SP TSX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BetaPro SP TSX 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 BetaPro SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BetaPro SP TSX has no effect on the direction of Bank of America i.e., Bank of America and BetaPro SP go up and down completely randomly.
Pair Corralation between Bank of America and BetaPro SP
Considering the 90-day investment horizon Bank of America is expected to generate 0.54 times more return on investment than BetaPro SP. However, Bank of America is 1.86 times less risky than BetaPro SP. It trades about 0.1 of its potential returns per unit of risk. BetaPro SP TSX is currently generating about 0.05 per unit of risk. If you would invest 2,824 in Bank of America on September 1, 2024 and sell it today you would earn a total of 1,927 from holding Bank of America or generate 68.24% 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. BetaPro SP TSX
Performance |
| Timeline |
| Bank of America |
| BetaPro SP TSX |
Bank of America and BetaPro SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and BetaPro SP
The main advantage of trading using opposite Bank of America and BetaPro SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, BetaPro SP 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 BetaPro SP will offset losses from the drop in BetaPro SP's long position.| Bank of America vs. Citigroup | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of | Bank of America vs. JPMorgan Chase Co |
| BetaPro SP vs. BetaPro SPTSX Capped | BetaPro SP vs. BetaPro SPTSX Capped | BetaPro SP vs. BetaPro SP TSX | BetaPro SP vs. BetaPro SP TSX |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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