Correlation Between Bank of America and Pax Balanced
Can any of the company-specific risk be diversified away by investing in both Bank of America and Pax Balanced 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 Pax Balanced 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 Pax Balanced Fund, you can compare the effects of market volatilities on Bank of America and Pax Balanced 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 Pax Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Pax Balanced.
Diversification Opportunities for Bank of America and Pax Balanced
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and Pax is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Pax Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pax Balanced 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 Pax Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pax Balanced has no effect on the direction of Bank of America i.e., Bank of America and Pax Balanced go up and down completely randomly.
Pair Corralation between Bank of America and Pax Balanced
Considering the 90-day investment horizon Bank of America is expected to generate 3.0 times more return on investment than Pax Balanced. However, Bank of America is 3.0 times more volatile than Pax Balanced Fund. It trades about 0.1 of its potential returns per unit of risk. Pax Balanced Fund is currently generating about 0.1 per unit of risk. If you would invest 3,938 in Bank of America on September 1, 2024 and sell it today you would earn a total of 813.00 from holding Bank of America or generate 20.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Bank of America vs. Pax Balanced Fund
Performance |
| Timeline |
| Bank of America |
| Pax Balanced |
Bank of America and Pax Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Pax Balanced
The main advantage of trading using opposite Bank of America and Pax Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Pax Balanced 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 Pax Balanced will offset losses from the drop in Pax Balanced'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 |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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