Correlation Between Bank of America and MTU Aero
Can any of the company-specific risk be diversified away by investing in both Bank of America and MTU Aero 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 MTU Aero 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 MTU Aero Engines, you can compare the effects of market volatilities on Bank of America and MTU Aero 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 MTU Aero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and MTU Aero.
Diversification Opportunities for Bank of America and MTU Aero
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and MTU is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and MTU Aero Engines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTU Aero Engines 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 MTU Aero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTU Aero Engines has no effect on the direction of Bank of America i.e., Bank of America and MTU Aero go up and down completely randomly.
Pair Corralation between Bank of America and MTU Aero
Considering the 90-day investment horizon Bank of America is expected to generate 0.89 times more return on investment than MTU Aero. However, Bank of America is 1.12 times less risky than MTU Aero. It trades about 0.29 of its potential returns per unit of risk. MTU Aero Engines is currently generating about 0.07 per unit of risk. If you would invest 4,231 in Bank of America on August 31, 2024 and sell it today you would earn a total of 546.00 from holding Bank of America or generate 12.9% 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. MTU Aero Engines
Performance |
| Timeline |
| Bank of America |
| MTU Aero Engines |
Bank of America and MTU Aero Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and MTU Aero
The main advantage of trading using opposite Bank of America and MTU Aero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, MTU Aero 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 MTU Aero will offset losses from the drop in MTU Aero's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |