Correlation Between Bank of America and Davis Financial
Can any of the company-specific risk be diversified away by investing in both Bank of America and Davis 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 Davis 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 Davis Financial Fund, you can compare the effects of market volatilities on Bank of America and Davis 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 Davis Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Davis Financial.
Diversification Opportunities for Bank of America and Davis Financial
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Davis is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Davis Financial Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis 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 Davis Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Financial has no effect on the direction of Bank of America i.e., Bank of America and Davis Financial go up and down completely randomly.
Pair Corralation between Bank of America and Davis Financial
Considering the 90-day investment horizon Bank of America is expected to generate 1.47 times more return on investment than Davis Financial. However, Bank of America is 1.47 times more volatile than Davis Financial Fund. It trades about 0.12 of its potential returns per unit of risk. Davis Financial Fund is currently generating about 0.14 per unit of risk. If you would invest 3,409 in Bank of America on August 27, 2024 and sell it today you would earn a total of 1,291 from holding Bank of America or generate 37.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Davis Financial Fund
Performance |
| Timeline |
| Bank of America |
| Davis Financial |
Bank of America and Davis Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Davis Financial
The main advantage of trading using opposite Bank of America and Davis Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Davis 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 Davis Financial will offset losses from the drop in Davis Financial's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Davis Financial vs. Rbc Bluebay Global | Davis Financial vs. Artisan Emerging Markets | Davis Financial vs. Mirova Global Green | Davis Financial vs. Ms Global Fixed |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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