Correlation Between Bank of America and Prudential Total
Can any of the company-specific risk be diversified away by investing in both Bank of America and Prudential Total 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 Prudential Total 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 Prudential Total Return, you can compare the effects of market volatilities on Bank of America and Prudential Total 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 Prudential Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Prudential Total.
Diversification Opportunities for Bank of America and Prudential Total
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Prudential is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Prudential Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Total Return 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 Prudential Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Total Return has no effect on the direction of Bank of America i.e., Bank of America and Prudential Total go up and down completely randomly.
Pair Corralation between Bank of America and Prudential Total
Considering the 90-day investment horizon Bank of America is expected to under-perform the Prudential Total. In addition to that, Bank of America is 3.22 times more volatile than Prudential Total Return. It trades about -0.31 of its total potential returns per unit of risk. Prudential Total Return is currently generating about 0.19 per unit of volatility. If you would invest 1,184 in Prudential Total Return on November 27, 2024 and sell it today you would earn a total of 13.00 from holding Prudential Total Return or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Prudential Total Return
Performance |
| Timeline |
| Bank of America |
| Prudential Total Return |
Bank of America and Prudential Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Prudential Total
The main advantage of trading using opposite Bank of America and Prudential Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Prudential Total 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 Prudential Total will offset losses from the drop in Prudential Total'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. Royal Bank of |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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