Correlation Between Bank of America and AEye
Can any of the company-specific risk be diversified away by investing in both Bank of America and AEye 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 AEye 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 AEye Inc, you can compare the effects of market volatilities on Bank of America and AEye 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 AEye. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and AEye.
Diversification Opportunities for Bank of America and AEye
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and AEye is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and AEye Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEye Inc 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 AEye. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEye Inc has no effect on the direction of Bank of America i.e., Bank of America and AEye go up and down completely randomly.
Pair Corralation between Bank of America and AEye
Considering the 90-day investment horizon Bank of America is expected to generate 5.75 times less return on investment than AEye. But when comparing it to its historical volatility, Bank of America is 11.35 times less risky than AEye. It trades about 0.31 of its potential returns per unit of risk. AEye Inc is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 0.90 in AEye Inc on September 1, 2024 and sell it today you would earn a total of 0.30 from holding AEye Inc or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. AEye Inc
Performance |
| Timeline |
| Bank of America |
| AEye Inc |
Bank of America and AEye Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and AEye
The main advantage of trading using opposite Bank of America and AEye positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, AEye 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 AEye will offset losses from the drop in AEye's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| AEye vs. Faraday Future Intelligent | AEye vs. Innoviz Technologies | AEye vs. Aeye Inc | AEye vs. Xos Equity Warrants |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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