Correlation Between Bank of America and Inverse Nasdaq-100
Can any of the company-specific risk be diversified away by investing in both Bank of America and Inverse Nasdaq-100 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 Inverse Nasdaq-100 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 Inverse Nasdaq 100 Strategy, you can compare the effects of market volatilities on Bank of America and Inverse Nasdaq-100 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 Inverse Nasdaq-100. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Inverse Nasdaq-100.
Diversification Opportunities for Bank of America and Inverse Nasdaq-100
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Inverse is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Inverse Nasdaq 100 Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inverse Nasdaq 100 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 Inverse Nasdaq-100. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inverse Nasdaq 100 has no effect on the direction of Bank of America i.e., Bank of America and Inverse Nasdaq-100 go up and down completely randomly.
Pair Corralation between Bank of America and Inverse Nasdaq-100
Considering the 90-day investment horizon Bank of America is expected to under-perform the Inverse Nasdaq-100. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 306.71 times less risky than Inverse Nasdaq-100. The stock trades about -0.34 of its potential returns per unit of risk. The Inverse Nasdaq 100 Strategy is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,339 in Inverse Nasdaq 100 Strategy on November 28, 2024 and sell it today you would earn a total of 12,127 from holding Inverse Nasdaq 100 Strategy or generate 905.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. Inverse Nasdaq 100 Strategy
Performance |
| Timeline |
| Bank of America |
| Inverse Nasdaq 100 |
Bank of America and Inverse Nasdaq-100 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Inverse Nasdaq-100
The main advantage of trading using opposite Bank of America and Inverse Nasdaq-100 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Inverse Nasdaq-100 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 Inverse Nasdaq-100 will offset losses from the drop in Inverse Nasdaq-100's 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 |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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