Correlation Between Bank of America and Needham Growth
Can any of the company-specific risk be diversified away by investing in both Bank of America and Needham Growth 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 Needham Growth 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 Needham Growth Fund, you can compare the effects of market volatilities on Bank of America and Needham Growth 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 Needham Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Needham Growth.
Diversification Opportunities for Bank of America and Needham Growth
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Needham is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Needham Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Needham Growth 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 Needham Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Needham Growth has no effect on the direction of Bank of America i.e., Bank of America and Needham Growth go up and down completely randomly.
Pair Corralation between Bank of America and Needham Growth
Considering the 90-day investment horizon Bank of America is expected to generate 1.0 times more return on investment than Needham Growth. However, Bank of America is 1.0 times less risky than Needham Growth. It trades about 0.06 of its potential returns per unit of risk. Needham Growth Fund is currently generating about 0.05 per unit of risk. If you would invest 3,079 in Bank of America on August 30, 2024 and sell it today you would earn a total of 1,698 from holding Bank of America or generate 55.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Needham Growth Fund
Performance |
| Timeline |
| Bank of America |
| Needham Growth |
Bank of America and Needham Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Needham Growth
The main advantage of trading using opposite Bank of America and Needham Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Needham Growth 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 Needham Growth will offset losses from the drop in Needham Growth's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
| Needham Growth vs. T Rowe Price | Needham Growth vs. T Rowe Price | Needham Growth vs. T Rowe Price | Needham Growth vs. Midcap Fund Class |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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