Correlation Between Bank of America and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Bank of America and Prudential Financial 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 Financial 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 Financial, you can compare the effects of market volatilities on Bank of America and Prudential Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Prudential Financial.
Diversification Opportunities for Bank of America and Prudential Financial
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Prudential is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Prudential Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial has no effect on the direction of Bank of America i.e., Bank of America and Prudential Financial go up and down completely randomly.
Pair Corralation between Bank of America and Prudential Financial
Considering the 90-day investment horizon Bank of America is expected to generate 0.75 times more return on investment than Prudential Financial. However, Bank of America is 1.34 times less risky than Prudential Financial. It trades about 0.14 of its potential returns per unit of risk. Prudential Financial is currently generating about -0.12 per unit of risk. If you would invest 4,621 in Bank of America on November 9, 2024 and sell it today you would earn a total of 153.00 from holding Bank of America or generate 3.31% 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 Financial
Performance |
| Timeline |
| Bank of America |
| Prudential Financial |
Bank of America and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Prudential Financial
The main advantage of trading using opposite Bank of America and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Prudential Financial 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 Financial will offset losses from the drop in Prudential Financial'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 |
| Prudential Financial vs. Lincoln National | Prudential Financial vs. Aflac Incorporated | Prudential Financial vs. Brighthouse Financial | Prudential Financial vs. Unum Group |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |