Correlation Between Bank of America and PGIM Large
Can any of the company-specific risk be diversified away by investing in both Bank of America and PGIM Large 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 PGIM Large 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 PGIM Large Cap Buffer, you can compare the effects of market volatilities on Bank of America and PGIM Large 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 PGIM Large. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and PGIM Large.
Diversification Opportunities for Bank of America and PGIM Large
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and PGIM is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and PGIM Large Cap Buffer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGIM Large Cap 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 PGIM Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGIM Large Cap has no effect on the direction of Bank of America i.e., Bank of America and PGIM Large go up and down completely randomly.
Pair Corralation between Bank of America and PGIM Large
Considering the 90-day investment horizon Bank of America is expected to generate 4.32 times more return on investment than PGIM Large. However, Bank of America is 4.32 times more volatile than PGIM Large Cap Buffer. It trades about 0.06 of its potential returns per unit of risk. PGIM Large Cap Buffer is currently generating about 0.15 per unit of risk. If you would invest 3,115 in Bank of America on September 3, 2024 and sell it today you would earn a total of 1,589 from holding Bank of America or generate 51.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 29.09% |
| Values | Daily Returns |
Bank of America vs. PGIM Large Cap Buffer
Performance |
| Timeline |
| Bank of America |
| PGIM Large Cap |
Bank of America and PGIM Large Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and PGIM Large
The main advantage of trading using opposite Bank of America and PGIM Large positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, PGIM Large 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 PGIM Large will offset losses from the drop in PGIM Large's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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