Correlation Between Bank of America and The Merger
Can any of the company-specific risk be diversified away by investing in both Bank of America and The Merger 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 The Merger 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 The Merger Fund, you can compare the effects of market volatilities on Bank of America and The Merger 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 The Merger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and The Merger.
Diversification Opportunities for Bank of America and The Merger
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and The is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and The Merger Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merger Fund 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 The Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merger Fund has no effect on the direction of Bank of America i.e., Bank of America and The Merger go up and down completely randomly.
Pair Corralation between Bank of America and The Merger
Considering the 90-day investment horizon Bank of America is expected to generate 10.31 times more return on investment than The Merger. However, Bank of America is 10.31 times more volatile than The Merger Fund. It trades about 0.31 of its potential returns per unit of risk. The Merger Fund is currently generating about 0.03 per unit of risk. If you would invest 4,182 in Bank of America on September 1, 2024 and sell it today you would earn a total of 569.00 from holding Bank of America or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. The Merger Fund
Performance |
| Timeline |
| Bank of America |
| Merger Fund |
Bank of America and The Merger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and The Merger
The main advantage of trading using opposite Bank of America and The Merger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, The Merger 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 The Merger will offset losses from the drop in The Merger'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 |
| The Merger vs. Calamos Market Neutral | The Merger vs. Gateway Fund Class | The Merger vs. The Arbitrage Fund | The Merger vs. Neuberger Berman Long |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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