Correlation Between Bank of America and Western Asset
Can any of the company-specific risk be diversified away by investing in both Bank of America and Western Asset 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 Western Asset 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 Western Asset Adjustable, you can compare the effects of market volatilities on Bank of America and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Western Asset.
Diversification Opportunities for Bank of America and Western Asset
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Western is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Western Asset Adjustable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Adjustable 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Adjustable has no effect on the direction of Bank of America i.e., Bank of America and Western Asset go up and down completely randomly.
Pair Corralation between Bank of America and Western Asset
Considering the 90-day investment horizon Bank of America is expected to generate 24.06 times more return on investment than Western Asset. However, Bank of America is 24.06 times more volatile than Western Asset Adjustable. It trades about 0.29 of its potential returns per unit of risk. Western Asset Adjustable is currently generating about 0.3 per unit of risk. If you would invest 4,231 in Bank of America on August 31, 2024 and sell it today you would earn a total of 546.00 from holding Bank of America or generate 12.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Western Asset Adjustable
Performance |
| Timeline |
| Bank of America |
| Western Asset Adjustable |
Bank of America and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Western Asset
The main advantage of trading using opposite Bank of America and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset's long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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