Correlation Between Bank of America and Institutional Fiduciary
Can any of the company-specific risk be diversified away by investing in both Bank of America and Institutional Fiduciary 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 Institutional Fiduciary 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 Institutional Fiduciary Trust, you can compare the effects of market volatilities on Bank of America and Institutional Fiduciary 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 Institutional Fiduciary. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Institutional Fiduciary.
Diversification Opportunities for Bank of America and Institutional Fiduciary
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Institutional is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Institutional Fiduciary Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Institutional Fiduciary 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 Institutional Fiduciary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Institutional Fiduciary has no effect on the direction of Bank of America i.e., Bank of America and Institutional Fiduciary go up and down completely randomly.
Pair Corralation between Bank of America and Institutional Fiduciary
Considering the 90-day investment horizon Bank of America is expected to generate 6.31 times less return on investment than Institutional Fiduciary. But when comparing it to its historical volatility, Bank of America is 17.52 times less risky than Institutional Fiduciary. It trades about 0.14 of its potential returns per unit of risk. Institutional Fiduciary Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 95.00 in Institutional Fiduciary Trust on August 24, 2024 and sell it today you would earn a total of 5.00 from holding Institutional Fiduciary Trust or generate 5.26% 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. Institutional Fiduciary Trust
Performance |
| Timeline |
| Bank of America |
| Institutional Fiduciary |
Bank of America and Institutional Fiduciary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Institutional Fiduciary
The main advantage of trading using opposite Bank of America and Institutional Fiduciary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Institutional Fiduciary 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 Institutional Fiduciary will offset losses from the drop in Institutional Fiduciary's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Institutional Fiduciary vs. Vanguard Total Stock | Institutional Fiduciary vs. Vanguard 500 Index | Institutional Fiduciary vs. Vanguard Total Stock | Institutional Fiduciary vs. Vanguard Total Stock |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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