Correlation Between Bank of America and Nasdaq-100 Fund
Can any of the company-specific risk be diversified away by investing in both Bank of America and Nasdaq-100 Fund 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 Nasdaq-100 Fund 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 Nasdaq 100 Fund Class, you can compare the effects of market volatilities on Bank of America and Nasdaq-100 Fund 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 Nasdaq-100 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Nasdaq-100 Fund.
Diversification Opportunities for Bank of America and Nasdaq-100 Fund
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Nasdaq-100 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Nasdaq 100 Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nasdaq 100 Fund 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 Nasdaq-100 Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nasdaq 100 Fund has no effect on the direction of Bank of America i.e., Bank of America and Nasdaq-100 Fund go up and down completely randomly.
Pair Corralation between Bank of America and Nasdaq-100 Fund
Considering the 90-day investment horizon Bank of America is expected to generate 1.17 times less return on investment than Nasdaq-100 Fund. In addition to that, Bank of America is 1.28 times more volatile than Nasdaq 100 Fund Class. It trades about 0.05 of its total potential returns per unit of risk. Nasdaq 100 Fund Class is currently generating about 0.08 per unit of volatility. If you would invest 4,874 in Nasdaq 100 Fund Class on August 24, 2024 and sell it today you would earn a total of 2,818 from holding Nasdaq 100 Fund Class or generate 57.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Nasdaq 100 Fund Class
Performance |
| Timeline |
| Bank of America |
| Nasdaq 100 Fund |
Bank of America and Nasdaq-100 Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Nasdaq-100 Fund
The main advantage of trading using opposite Bank of America and Nasdaq-100 Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Nasdaq-100 Fund 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 Nasdaq-100 Fund will offset losses from the drop in Nasdaq-100 Fund's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Nasdaq-100 Fund vs. HUMANA INC | Nasdaq-100 Fund vs. Aquagold International | Nasdaq-100 Fund vs. Barloworld Ltd ADR | Nasdaq-100 Fund vs. Morningstar Unconstrained Allocation |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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