Correlation Between Bank of America and National Capital
Can any of the company-specific risk be diversified away by investing in both Bank of America and National Capital 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 Capital 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 Capital Bank, you can compare the effects of market volatilities on Bank of America and National Capital 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 Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and National Capital.
Diversification Opportunities for Bank of America and National Capital
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and National is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital 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 Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of Bank of America i.e., Bank of America and National Capital go up and down completely randomly.
Pair Corralation between Bank of America and National Capital
Considering the 90-day investment horizon Bank of America is expected to generate 245.19 times less return on investment than National Capital. But when comparing it to its historical volatility, Bank of America is 80.55 times less risky than National Capital. It trades about 0.1 of its potential returns per unit of risk. National Capital Bank is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 16,200 in National Capital Bank on August 31, 2024 and sell it today you would lose (7,700) from holding National Capital Bank or give up 47.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 59.36% |
| Values | Daily Returns |
Bank of America vs. National Capital Bank
Performance |
| Timeline |
| Bank of America |
| National Capital Bank |
Bank of America and National Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and National Capital
The main advantage of trading using opposite Bank of America and National Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, National Capital 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 Capital will offset losses from the drop in National Capital'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 |
| National Capital vs. Delhi Bank Corp | National Capital vs. CCSB Financial Corp | National Capital vs. Bank of Utica | National Capital vs. BEO Bancorp |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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