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 2040, 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 2040 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2040 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 2040 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 2.35 times more return on investment than American Funds. However, Bank of America is 2.35 times more volatile than American Funds 2040. It trades about 0.06 of its potential returns per unit of risk. American Funds 2040 is currently generating about 0.09 per unit of risk. If you would invest 3,113 in Bank of America on September 1, 2024 and sell it today you would earn a total of 1,638 from holding Bank of America or generate 52.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. American Funds 2040
Performance |
| Timeline |
| Bank of America |
| American Funds 2040 |
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. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| American Funds vs. Gabelli Convertible And | American Funds vs. Virtus Convertible | American Funds vs. Absolute Convertible Arbitrage | American Funds vs. Allianzgi Convertible Income |
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.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |