Correlation Between Bank of America and MSP Steel
Can any of the company-specific risk be diversified away by investing in both Bank of America and MSP Steel 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 MSP Steel 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 MSP Steel Power, you can compare the effects of market volatilities on Bank of America and MSP Steel 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 MSP Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and MSP Steel.
Diversification Opportunities for Bank of America and MSP Steel
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and MSP is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and MSP Steel Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSP Steel Power 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 MSP Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSP Steel Power has no effect on the direction of Bank of America i.e., Bank of America and MSP Steel go up and down completely randomly.
Pair Corralation between Bank of America and MSP Steel
Considering the 90-day investment horizon Bank of America is expected to generate 1.08 times less return on investment than MSP Steel. But when comparing it to its historical volatility, Bank of America is 1.78 times less risky than MSP Steel. It trades about 0.27 of its potential returns per unit of risk. MSP Steel Power is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,001 in MSP Steel Power on August 30, 2024 and sell it today you would earn a total of 475.00 from holding MSP Steel Power or generate 11.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. MSP Steel Power
Performance |
| Timeline |
| Bank of America |
| MSP Steel Power |
Bank of America and MSP Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and MSP Steel
The main advantage of trading using opposite Bank of America and MSP Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, MSP Steel 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 MSP Steel will offset losses from the drop in MSP Steel'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 |
| MSP Steel vs. NMDC Limited | MSP Steel vs. Steel Authority of | MSP Steel vs. Embassy Office Parks | MSP Steel vs. Gujarat Narmada Valley |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |