Correlation Between Bank of America and Peoples Bancorp
Can any of the company-specific risk be diversified away by investing in both Bank of America and Peoples Bancorp 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 Peoples Bancorp 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 Peoples Bancorp, you can compare the effects of market volatilities on Bank of America and Peoples Bancorp 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 Peoples Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Peoples Bancorp.
Diversification Opportunities for Bank of America and Peoples Bancorp
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Peoples is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Peoples Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples Bancorp 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 Peoples Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Bancorp has no effect on the direction of Bank of America i.e., Bank of America and Peoples Bancorp go up and down completely randomly.
Pair Corralation between Bank of America and Peoples Bancorp
Considering the 90-day investment horizon Bank of America is expected to generate 1.39 times less return on investment than Peoples Bancorp. But when comparing it to its historical volatility, Bank of America is 1.66 times less risky than Peoples Bancorp. It trades about 0.26 of its potential returns per unit of risk. Peoples Bancorp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,114 in Peoples Bancorp on August 28, 2024 and sell it today you would earn a total of 488.00 from holding Peoples Bancorp or generate 15.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Peoples Bancorp
Performance |
| Timeline |
| Bank of America |
| Peoples Bancorp |
Bank of America and Peoples Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Peoples Bancorp
The main advantage of trading using opposite Bank of America and Peoples Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Peoples Bancorp 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 Peoples Bancorp will offset losses from the drop in Peoples Bancorp's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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