Correlation Between Bank of America and Sp Midcap
Can any of the company-specific risk be diversified away by investing in both Bank of America and Sp Midcap 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 Sp Midcap 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 Sp Midcap 400, you can compare the effects of market volatilities on Bank of America and Sp Midcap 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 Sp Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Sp Midcap.
Diversification Opportunities for Bank of America and Sp Midcap
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bank and RYBHX is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Sp Midcap 400 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp Midcap 400 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 Sp Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp Midcap 400 has no effect on the direction of Bank of America i.e., Bank of America and Sp Midcap go up and down completely randomly.
Pair Corralation between Bank of America and Sp Midcap
Considering the 90-day investment horizon Bank of America is expected to generate 1.22 times more return on investment than Sp Midcap. However, Bank of America is 1.22 times more volatile than Sp Midcap 400. It trades about 0.14 of its potential returns per unit of risk. Sp Midcap 400 is currently generating about 0.14 per unit of risk. If you would invest 4,621 in Bank of America on November 9, 2024 and sell it today you would earn a total of 153.00 from holding Bank of America or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Sp Midcap 400
Performance |
| Timeline |
| Bank of America |
| Sp Midcap 400 |
Bank of America and Sp Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Sp Midcap
The main advantage of trading using opposite Bank of America and Sp Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Sp Midcap 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 Sp Midcap will offset losses from the drop in Sp Midcap'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 |
| Sp Midcap vs. Sp Smallcap 600 | Sp Midcap vs. Sp 500 Pure | Sp Midcap vs. Sp Midcap 400 | Sp Midcap vs. Sp Smallcap 600 |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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