Correlation Between Bank of America and Transamerica Short-term
Can any of the company-specific risk be diversified away by investing in both Bank of America and Transamerica Short-term 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 Transamerica Short-term 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 Transamerica Short Term Bond, you can compare the effects of market volatilities on Bank of America and Transamerica Short-term 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 Transamerica Short-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Transamerica Short-term.
Diversification Opportunities for Bank of America and Transamerica Short-term
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and Transamerica is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Transamerica Short Term Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transamerica Short Term 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 Transamerica Short-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transamerica Short Term has no effect on the direction of Bank of America i.e., Bank of America and Transamerica Short-term go up and down completely randomly.
Pair Corralation between Bank of America and Transamerica Short-term
Considering the 90-day investment horizon Bank of America is expected to generate 10.61 times more return on investment than Transamerica Short-term. However, Bank of America is 10.61 times more volatile than Transamerica Short Term Bond. It trades about 0.05 of its potential returns per unit of risk. Transamerica Short Term Bond is currently generating about 0.14 per unit of risk. If you would invest 3,099 in Bank of America on November 27, 2024 and sell it today you would earn a total of 1,266 from holding Bank of America or generate 40.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Transamerica Short Term Bond
Performance |
| Timeline |
| Bank of America |
| Transamerica Short Term |
Bank of America and Transamerica Short-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Transamerica Short-term
The main advantage of trading using opposite Bank of America and Transamerica Short-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Transamerica Short-term 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 Transamerica Short-term will offset losses from the drop in Transamerica Short-term's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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