Correlation Between Bank of America and Betashares Australian
Can any of the company-specific risk be diversified away by investing in both Bank of America and Betashares Australian 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 Betashares Australian 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 Betashares Australian Momentum, you can compare the effects of market volatilities on Bank of America and Betashares Australian 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 Betashares Australian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Betashares Australian.
Diversification Opportunities for Bank of America and Betashares Australian
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Betashares is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Betashares Australian Momentum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Betashares Australian 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 Betashares Australian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Betashares Australian has no effect on the direction of Bank of America i.e., Bank of America and Betashares Australian go up and down completely randomly.
Pair Corralation between Bank of America and Betashares Australian
Considering the 90-day investment horizon Bank of America is expected to generate 1.57 times more return on investment than Betashares Australian. However, Bank of America is 1.57 times more volatile than Betashares Australian Momentum. It trades about 0.12 of its potential returns per unit of risk. Betashares Australian Momentum is currently generating about 0.12 per unit of risk. If you would invest 3,409 in Bank of America on August 27, 2024 and sell it today you would earn a total of 1,291 from holding Bank of America or generate 37.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 47.34% |
| Values | Daily Returns |
Bank of America vs. Betashares Australian Momentum
Performance |
| Timeline |
| Bank of America |
| Betashares Australian |
Bank of America and Betashares Australian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Betashares Australian
The main advantage of trading using opposite Bank of America and Betashares Australian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Betashares Australian 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 Betashares Australian will offset losses from the drop in Betashares Australian's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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