Correlation Between Bank of America and Exchange Traded
Can any of the company-specific risk be diversified away by investing in both Bank of America and Exchange Traded 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 Exchange Traded 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 Exchange Traded Concepts, you can compare the effects of market volatilities on Bank of America and Exchange Traded 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 Exchange Traded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Exchange Traded.
Diversification Opportunities for Bank of America and Exchange Traded
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Exchange is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Bank of America i.e., Bank of America and Exchange Traded go up and down completely randomly.
Pair Corralation between Bank of America and Exchange Traded
Considering the 90-day investment horizon Bank of America is expected to generate 1.73 times less return on investment than Exchange Traded. But when comparing it to its historical volatility, Bank of America is 1.22 times less risky than Exchange Traded. It trades about 0.1 of its potential returns per unit of risk. Exchange Traded Concepts is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 3,348 in Exchange Traded Concepts on September 1, 2024 and sell it today you would earn a total of 1,314 from holding Exchange Traded Concepts or generate 39.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Bank of America vs. Exchange Traded Concepts
Performance |
| Timeline |
| Bank of America |
| Exchange Traded Concepts |
Bank of America and Exchange Traded Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Exchange Traded
The main advantage of trading using opposite Bank of America and Exchange Traded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Exchange Traded 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 Exchange Traded will offset losses from the drop in Exchange Traded'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 |
| Exchange Traded vs. First Trust Exchange Traded | Exchange Traded vs. Ultimus Managers Trust | Exchange Traded vs. Horizon Kinetics Medical | Exchange Traded vs. Harbor Health Care |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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