Correlation Between Bank of America and MCB Bank
Can any of the company-specific risk be diversified away by investing in both Bank of America and MCB Bank 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 MCB Bank 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 MCB Bank, you can compare the effects of market volatilities on Bank of America and MCB Bank 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 MCB Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and MCB Bank.
Diversification Opportunities for Bank of America and MCB Bank
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and MCB is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and MCB Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MCB Bank 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 MCB Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MCB Bank has no effect on the direction of Bank of America i.e., Bank of America and MCB Bank go up and down completely randomly.
Pair Corralation between Bank of America and MCB Bank
Considering the 90-day investment horizon Bank of America is expected to generate 1.0 times more return on investment than MCB Bank. However, Bank of America is 1.0 times less risky than MCB Bank. It trades about 0.26 of its potential returns per unit of risk. MCB Bank is currently generating about 0.14 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. MCB Bank
Performance |
| Timeline |
| Bank of America |
| MCB Bank |
Bank of America and MCB Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and MCB Bank
The main advantage of trading using opposite Bank of America and MCB Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, MCB Bank 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 MCB Bank will offset losses from the drop in MCB Bank's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Nova |
| MCB Bank vs. National Bank of | MCB Bank vs. Meezan Bank | MCB Bank vs. Bank Al Habib | MCB Bank vs. Habib Metropolitan Bank |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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