Correlation Between Bank of America and Hennessy Cornerstone
Can any of the company-specific risk be diversified away by investing in both Bank of America and Hennessy Cornerstone 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 Hennessy Cornerstone 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 Hennessy Nerstone Value, you can compare the effects of market volatilities on Bank of America and Hennessy Cornerstone 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 Hennessy Cornerstone. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Hennessy Cornerstone.
Diversification Opportunities for Bank of America and Hennessy Cornerstone
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Hennessy is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Hennessy Nerstone Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Nerstone Value 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 Hennessy Cornerstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Nerstone Value has no effect on the direction of Bank of America i.e., Bank of America and Hennessy Cornerstone go up and down completely randomly.
Pair Corralation between Bank of America and Hennessy Cornerstone
Considering the 90-day investment horizon Bank of America is expected to generate 2.24 times more return on investment than Hennessy Cornerstone. However, Bank of America is 2.24 times more volatile than Hennessy Nerstone Value. It trades about 0.11 of its potential returns per unit of risk. Hennessy Nerstone Value is currently generating about 0.09 per unit of risk. If you would invest 2,583 in Bank of America on August 26, 2024 and sell it today you would earn a total of 2,117 from holding Bank of America or generate 81.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Hennessy Nerstone Value
Performance |
| Timeline |
| Bank of America |
| Hennessy Nerstone Value |
Bank of America and Hennessy Cornerstone Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Hennessy Cornerstone
The main advantage of trading using opposite Bank of America and Hennessy Cornerstone positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Hennessy Cornerstone 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 Hennessy Cornerstone will offset losses from the drop in Hennessy Cornerstone'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 |
| Hennessy Cornerstone vs. Hennessy Nerstone Growth | Hennessy Cornerstone vs. Hennessy Total Return | Hennessy Cornerstone vs. Hennessy Balanced Fund | Hennessy Cornerstone vs. Hennessy Nerstone Large |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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