Correlation Between Bank of America and National Bank
Can any of the company-specific risk be diversified away by investing in both Bank of America and National Bank 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 National Bank 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 National Bank of, you can compare the effects of market volatilities on Bank of America and National Bank 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 National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and National Bank.
Diversification Opportunities for Bank of America and National Bank
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and National is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and National Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank has no effect on the direction of Bank of America i.e., Bank of America and National Bank go up and down completely randomly.
Pair Corralation between Bank of America and National Bank
Considering the 90-day investment horizon Bank of America is expected to generate 7.69 times more return on investment than National Bank. However, Bank of America is 7.69 times more volatile than National Bank of. It trades about 0.31 of its potential returns per unit of risk. National Bank of is currently generating about 0.24 per unit of risk. If you would invest 4,182 in Bank of America on September 1, 2024 and sell it today you would earn a total of 569.00 from holding Bank of America or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. National Bank of
Performance |
| Timeline |
| Bank of America |
| National Bank |
Bank of America and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and National Bank
The main advantage of trading using opposite Bank of America and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, National Bank 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 National Bank will offset losses from the drop in National Bank's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| National Bank vs. Fairfax Financial Holdings | National Bank vs. iShares Canadian HYBrid | National Bank vs. Brompton European Dividend | National Bank vs. Solar Alliance Energy |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
Other Complementary Tools
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |