Correlation Between Bank of America and American Funds
Can any of the company-specific risk be diversified away by investing in both Bank of America and American Funds 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 American Funds 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 American Funds 2055, you can compare the effects of market volatilities on Bank of America and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and American Funds.
Diversification Opportunities for Bank of America and American Funds
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and American is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and American Funds 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2055 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2055 has no effect on the direction of Bank of America i.e., Bank of America and American Funds go up and down completely randomly.
Pair Corralation between Bank of America and American Funds
Considering the 90-day investment horizon Bank of America is expected to generate 2.2 times more return on investment than American Funds. However, Bank of America is 2.2 times more volatile than American Funds 2055. It trades about 0.11 of its potential returns per unit of risk. American Funds 2055 is currently generating about 0.1 per unit of risk. If you would invest 2,650 in Bank of America on August 30, 2024 and sell it today you would earn a total of 2,127 from holding Bank of America or generate 80.26% 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. American Funds 2055
Performance |
| Timeline |
| Bank of America |
| American Funds 2055 |
Bank of America and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and American Funds
The main advantage of trading using opposite Bank of America and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
| American Funds vs. Goldman Sachs Inflation | American Funds vs. Ab Bond Inflation | American Funds vs. Fidelity Sai Inflationfocused | American Funds vs. Arrow Managed Futures |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |