Correlation Between Bank of America and RBC Banks
Can any of the company-specific risk be diversified away by investing in both Bank of America and RBC Banks 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 RBC Banks 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 RBC Banks Yield, you can compare the effects of market volatilities on Bank of America and RBC Banks 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 RBC Banks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and RBC Banks.
Diversification Opportunities for Bank of America and RBC Banks
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and RBC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and RBC Banks Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RBC Banks Yield 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 RBC Banks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RBC Banks Yield has no effect on the direction of Bank of America i.e., Bank of America and RBC Banks go up and down completely randomly.
Pair Corralation between Bank of America and RBC Banks
Considering the 90-day investment horizon Bank of America is expected to generate 1.4 times more return on investment than RBC Banks. However, Bank of America is 1.4 times more volatile than RBC Banks Yield. It trades about -0.04 of its potential returns per unit of risk. RBC Banks Yield is currently generating about -0.26 per unit of risk. If you would invest 4,672 in Bank of America on December 1, 2024 and sell it today you would lose (62.00) from holding Bank of America or give up 1.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. RBC Banks Yield
Performance |
| Timeline |
| Bank of America |
| RBC Banks Yield |
Bank of America and RBC Banks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and RBC Banks
The main advantage of trading using opposite Bank of America and RBC Banks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, RBC Banks 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 RBC Banks will offset losses from the drop in RBC Banks' long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| RBC Banks vs. RBC Banks Yield | RBC Banks vs. RBC Quant Dividend | RBC Banks vs. RBC Quant European | RBC Banks vs. RBC Short Term |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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