Correlation Between Bank of America and Meridian Equity
Can any of the company-specific risk be diversified away by investing in both Bank of America and Meridian Equity 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 Meridian Equity 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 Meridian Equity Income, you can compare the effects of market volatilities on Bank of America and Meridian Equity 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 Meridian Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Meridian Equity.
Diversification Opportunities for Bank of America and Meridian Equity
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Meridian is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Meridian Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Equity Income 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 Meridian Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Equity Income has no effect on the direction of Bank of America i.e., Bank of America and Meridian Equity go up and down completely randomly.
Pair Corralation between Bank of America and Meridian Equity
Considering the 90-day investment horizon Bank of America is expected to generate 2.54 times more return on investment than Meridian Equity. However, Bank of America is 2.54 times more volatile than Meridian Equity Income. It trades about 0.1 of its potential returns per unit of risk. Meridian Equity Income is currently generating about 0.09 per unit of risk. If you would invest 2,770 in Bank of America on September 12, 2024 and sell it today you would earn a total of 1,805 from holding Bank of America or generate 65.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Meridian Equity Income
Performance |
| Timeline |
| Bank of America |
| Meridian Equity Income |
Bank of America and Meridian Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Meridian Equity
The main advantage of trading using opposite Bank of America and Meridian Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Meridian Equity 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 Meridian Equity will offset losses from the drop in Meridian Equity's long position.| Bank of America vs. JPMorgan Chase Co | Bank of America vs. Victory Integrity Smallmid Cap | Bank of America vs. Hilton Worldwide Holdings | Bank of America vs. NVIDIA |
| Meridian Equity vs. Gold And Precious | Meridian Equity vs. Gamco Global Gold | Meridian Equity vs. Oppenheimer Gold Special | Meridian Equity vs. International Investors Gold |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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