Correlation Between Bank of America and IShares Europe
Can any of the company-specific risk be diversified away by investing in both Bank of America and IShares Europe 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 IShares Europe 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 iShares Europe ETF, you can compare the effects of market volatilities on Bank of America and IShares Europe 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 IShares Europe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and IShares Europe.
Diversification Opportunities for Bank of America and IShares Europe
-0.88 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and IShares is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and iShares Europe ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Europe ETF 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 IShares Europe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Europe ETF has no effect on the direction of Bank of America i.e., Bank of America and IShares Europe go up and down completely randomly.
Pair Corralation between Bank of America and IShares Europe
Considering the 90-day investment horizon Bank of America is expected to generate 2.26 times more return on investment than IShares Europe. However, Bank of America is 2.26 times more volatile than iShares Europe ETF. It trades about 0.26 of its potential returns per unit of risk. iShares Europe ETF is currently generating about -0.29 per unit of risk. If you would invest 4,262 in Bank of America on August 28, 2024 and sell it today you would earn a total of 488.00 from holding Bank of America or generate 11.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. iShares Europe ETF
Performance |
| Timeline |
| Bank of America |
| iShares Europe ETF |
Bank of America and IShares Europe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and IShares Europe
The main advantage of trading using opposite Bank of America and IShares Europe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, IShares Europe 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 IShares Europe will offset losses from the drop in IShares Europe's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
| IShares Europe vs. WisdomTree International Hedged | IShares Europe vs. WisdomTree Emerging Markets | IShares Europe vs. WisdomTree Dynamic Currency |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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