Correlation Between Bank of America and Federated Mdt
Can any of the company-specific risk be diversified away by investing in both Bank of America and Federated Mdt 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 Federated Mdt 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 Federated Mdt Small, you can compare the effects of market volatilities on Bank of America and Federated Mdt 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 Federated Mdt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Federated Mdt.
Diversification Opportunities for Bank of America and Federated Mdt
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Federated is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Federated Mdt Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Mdt Small 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 Federated Mdt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Mdt Small has no effect on the direction of Bank of America i.e., Bank of America and Federated Mdt go up and down completely randomly.
Pair Corralation between Bank of America and Federated Mdt
Considering the 90-day investment horizon Bank of America is expected to generate 1.15 times more return on investment than Federated Mdt. However, Bank of America is 1.15 times more volatile than Federated Mdt Small. It trades about 0.1 of its potential returns per unit of risk. Federated Mdt Small is currently generating about 0.12 per unit of risk. If you would invest 3,938 in Bank of America on September 1, 2024 and sell it today you would earn a total of 813.00 from holding Bank of America or generate 20.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Bank of America vs. Federated Mdt Small
Performance |
| Timeline |
| Bank of America |
| Federated Mdt Small |
Bank of America and Federated Mdt Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Federated Mdt
The main advantage of trading using opposite Bank of America and Federated Mdt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Federated Mdt 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 Federated Mdt will offset losses from the drop in Federated Mdt'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 |
| Federated Mdt vs. Federated Emerging Market | Federated Mdt vs. Federated Mdt All | Federated Mdt vs. Federated Mdt Balanced | Federated Mdt vs. Federated Global Allocation |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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