Correlation Between Bank of America and Maple Leaf
Can any of the company-specific risk be diversified away by investing in both Bank of America and Maple Leaf 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 Maple Leaf 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 Maple Leaf Green, you can compare the effects of market volatilities on Bank of America and Maple Leaf 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 Maple Leaf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Maple Leaf.
Diversification Opportunities for Bank of America and Maple Leaf
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Maple is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Maple Leaf Green in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maple Leaf Green 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 Maple Leaf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maple Leaf Green has no effect on the direction of Bank of America i.e., Bank of America and Maple Leaf go up and down completely randomly.
Pair Corralation between Bank of America and Maple Leaf
Considering the 90-day investment horizon Bank of America is expected to generate 14.02 times less return on investment than Maple Leaf. But when comparing it to its historical volatility, Bank of America is 11.77 times less risky than Maple Leaf. It trades about 0.06 of its potential returns per unit of risk. Maple Leaf Green is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4.20 in Maple Leaf Green on August 29, 2024 and sell it today you would lose (0.81) from holding Maple Leaf Green or give up 19.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Maple Leaf Green
Performance |
| Timeline |
| Bank of America |
| Maple Leaf Green |
Bank of America and Maple Leaf Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Maple Leaf
The main advantage of trading using opposite Bank of America and Maple Leaf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Maple Leaf 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 Maple Leaf will offset losses from the drop in Maple Leaf's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Nova |
| Maple Leaf vs. Rezolute | Maple Leaf vs. Tempest Therapeutics | Maple Leaf vs. Forte Biosciences | Maple Leaf vs. Dyadic International |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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