Correlation Between Bank of America and Pear Tree
Can any of the company-specific risk be diversified away by investing in both Bank of America and Pear Tree 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 Pear Tree 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 Pear Tree Polaris, you can compare the effects of market volatilities on Bank of America and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Pear Tree.
Diversification Opportunities for Bank of America and Pear Tree
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and Pear is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris 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 Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of Bank of America i.e., Bank of America and Pear Tree go up and down completely randomly.
Pair Corralation between Bank of America and Pear Tree
Considering the 90-day investment horizon Bank of America is expected to generate 2.61 times more return on investment than Pear Tree. However, Bank of America is 2.61 times more volatile than Pear Tree Polaris. It trades about 0.16 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.09 per unit of risk. If you would invest 4,044 in Bank of America on September 2, 2024 and sell it today you would earn a total of 707.00 from holding Bank of America or generate 17.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Pear Tree Polaris
Performance |
| Timeline |
| Bank of America |
| Pear Tree Polaris |
Bank of America and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Pear Tree
The main advantage of trading using opposite Bank of America and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Pear Tree vs. Pear Tree Essex | Pear Tree vs. Essex Environmental Opportunities | Pear Tree vs. Pear Tree Quality | Pear Tree vs. Pear Tree Polaris |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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