Correlation Between Bank of America and Global Advantage
Can any of the company-specific risk be diversified away by investing in both Bank of America and Global Advantage 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 Global Advantage 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 Global Advantage Portfolio, you can compare the effects of market volatilities on Bank of America and Global Advantage 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 Global Advantage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Global Advantage.
Diversification Opportunities for Bank of America and Global Advantage
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Global is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Global Advantage Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Advantage Por 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 Global Advantage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Advantage Por has no effect on the direction of Bank of America i.e., Bank of America and Global Advantage go up and down completely randomly.
Pair Corralation between Bank of America and Global Advantage
Considering the 90-day investment horizon Bank of America is expected to generate 1.49 times less return on investment than Global Advantage. But when comparing it to its historical volatility, Bank of America is 1.23 times less risky than Global Advantage. It trades about 0.25 of its potential returns per unit of risk. Global Advantage Portfolio is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 1,401 in Global Advantage Portfolio on November 1, 2024 and sell it today you would earn a total of 133.00 from holding Global Advantage Portfolio or generate 9.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Global Advantage Portfolio
Performance |
| Timeline |
| Bank of America |
| Global Advantage Por |
Bank of America and Global Advantage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Global Advantage
The main advantage of trading using opposite Bank of America and Global Advantage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Global Advantage 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 Global Advantage will offset losses from the drop in Global Advantage's long position.| Bank of America vs. Royal Bank of | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Canadian Imperial Bank |
| Global Advantage vs. Global Advantage Portfolio | Global Advantage vs. Global Advantage Portfolio | Global Advantage vs. Ridgeworth Innovative Growth | Global Advantage vs. Transamerica Capital Growth |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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