Correlation Between Bank of America and JetBlue Airways
Can any of the company-specific risk be diversified away by investing in both Bank of America and JetBlue Airways 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 JetBlue Airways 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 JetBlue Airways, you can compare the effects of market volatilities on Bank of America and JetBlue Airways 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 JetBlue Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and JetBlue Airways.
Diversification Opportunities for Bank of America and JetBlue Airways
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and JetBlue is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and JetBlue Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways has no effect on the direction of Bank of America i.e., Bank of America and JetBlue Airways go up and down completely randomly.
Pair Corralation between Bank of America and JetBlue Airways
Considering the 90-day investment horizon Bank of America is expected to generate 1.21 times less return on investment than JetBlue Airways. But when comparing it to its historical volatility, Bank of America is 3.03 times less risky than JetBlue Airways. It trades about 0.12 of its potential returns per unit of risk. JetBlue Airways is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 9,125 in JetBlue Airways on August 28, 2024 and sell it today you would earn a total of 2,563 from holding JetBlue Airways or generate 28.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.56% |
| Values | Daily Returns |
Bank of America vs. JetBlue Airways
Performance |
| Timeline |
| Bank of America |
| JetBlue Airways |
Bank of America and JetBlue Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and JetBlue Airways
The main advantage of trading using opposite Bank of America and JetBlue Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, JetBlue Airways 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 JetBlue Airways will offset losses from the drop in JetBlue Airways' 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 |
| JetBlue Airways vs. Capital One Financial | JetBlue Airways vs. CVS Health | JetBlue Airways vs. Ameriprise Financial | JetBlue Airways vs. Grupo Carso SAB |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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