Correlation Between Bank of America and North Carolina
Can any of the company-specific risk be diversified away by investing in both Bank of America and North Carolina 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 North Carolina 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 North Carolina Tax Free, you can compare the effects of market volatilities on Bank of America and North Carolina 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 North Carolina. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and North Carolina.
Diversification Opportunities for Bank of America and North Carolina
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and North is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and North Carolina Tax Free in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Carolina Tax 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 North Carolina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Carolina Tax has no effect on the direction of Bank of America i.e., Bank of America and North Carolina go up and down completely randomly.
Pair Corralation between Bank of America and North Carolina
Considering the 90-day investment horizon Bank of America is expected to generate 5.13 times more return on investment than North Carolina. However, Bank of America is 5.13 times more volatile than North Carolina Tax Free. It trades about 0.09 of its potential returns per unit of risk. North Carolina Tax Free is currently generating about -0.02 per unit of risk. If you would invest 4,540 in Bank of America on November 5, 2024 and sell it today you would earn a total of 90.00 from holding Bank of America or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. North Carolina Tax Free
Performance |
| Timeline |
| Bank of America |
| North Carolina Tax |
Bank of America and North Carolina Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and North Carolina
The main advantage of trading using opposite Bank of America and North Carolina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, North Carolina 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 North Carolina will offset losses from the drop in North Carolina's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Royal Bank of | Bank of America vs. Canadian Imperial Bank |
| North Carolina vs. Ab High Income | North Carolina vs. Goldman Sachs High | North Carolina vs. Calamos High Income | North Carolina vs. Barings High Yield |
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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