Correlation Between Bank of America and Midcap Fund
Can any of the company-specific risk be diversified away by investing in both Bank of America and Midcap Fund 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 Midcap Fund 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 Midcap Fund Class, you can compare the effects of market volatilities on Bank of America and Midcap Fund 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 Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Midcap Fund.
Diversification Opportunities for Bank of America and Midcap Fund
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Midcap is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Midcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund Class 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 Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund Class has no effect on the direction of Bank of America i.e., Bank of America and Midcap Fund go up and down completely randomly.
Pair Corralation between Bank of America and Midcap Fund
Considering the 90-day investment horizon Bank of America is expected to generate 1.97 times more return on investment than Midcap Fund. However, Bank of America is 1.97 times more volatile than Midcap Fund Class. It trades about 0.27 of its potential returns per unit of risk. Midcap Fund Class is currently generating about 0.33 per unit of risk. If you would invest 4,231 in Bank of America on August 31, 2024 and sell it today you would earn a total of 520.00 from holding Bank of America or generate 12.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. Midcap Fund Class
Performance |
| Timeline |
| Bank of America |
| Midcap Fund Class |
Bank of America and Midcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Midcap Fund
The main advantage of trading using opposite Bank of America and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Midcap Fund 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 Midcap Fund will offset losses from the drop in Midcap Fund's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Midcap Fund vs. Prudential Government Income | Midcap Fund vs. Inverse Government Long | Midcap Fund vs. Aig Government Money | Midcap Fund vs. Dws Government Money |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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