Correlation Between Bank of America and MSAD Insurance
Can any of the company-specific risk be diversified away by investing in both Bank of America and MSAD Insurance 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 MSAD Insurance 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 MSAD Insurance Group, you can compare the effects of market volatilities on Bank of America and MSAD Insurance 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 MSAD Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and MSAD Insurance.
Diversification Opportunities for Bank of America and MSAD Insurance
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and MSAD is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and MSAD Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD Insurance Group 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 MSAD Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD Insurance Group has no effect on the direction of Bank of America i.e., Bank of America and MSAD Insurance go up and down completely randomly.
Pair Corralation between Bank of America and MSAD Insurance
Considering the 90-day investment horizon Bank of America is expected to generate 0.47 times more return on investment than MSAD Insurance. However, Bank of America is 2.13 times less risky than MSAD Insurance. It trades about 0.25 of its potential returns per unit of risk. MSAD Insurance Group is currently generating about -0.04 per unit of risk. If you would invest 3,968 in Bank of America on August 30, 2024 and sell it today you would earn a total of 809.00 from holding Bank of America or generate 20.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. MSAD Insurance Group
Performance |
| Timeline |
| Bank of America |
| MSAD Insurance Group |
Bank of America and MSAD Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and MSAD Insurance
The main advantage of trading using opposite Bank of America and MSAD Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, MSAD Insurance 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 MSAD Insurance will offset losses from the drop in MSAD Insurance's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings |
| MSAD Insurance vs. MSAD Insurance Group | MSAD Insurance vs. Sompo Holdings ADR | MSAD Insurance vs. The Allstate | MSAD Insurance vs. Horace Mann Educators |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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