Correlation Between Bank of America and Schwab Dividend
Can any of the company-specific risk be diversified away by investing in both Bank of America and Schwab Dividend 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 Schwab Dividend 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 Schwab Dividend Equity, you can compare the effects of market volatilities on Bank of America and Schwab Dividend 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 Schwab Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Schwab Dividend.
Diversification Opportunities for Bank of America and Schwab Dividend
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Schwab is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Schwab Dividend Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Dividend Equity 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 Schwab Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Dividend Equity has no effect on the direction of Bank of America i.e., Bank of America and Schwab Dividend go up and down completely randomly.
Pair Corralation between Bank of America and Schwab Dividend
Considering the 90-day investment horizon Bank of America is expected to generate 2.17 times more return on investment than Schwab Dividend. However, Bank of America is 2.17 times more volatile than Schwab Dividend Equity. It trades about 0.11 of its potential returns per unit of risk. Schwab Dividend Equity is currently generating about 0.16 per unit of risk. If you would invest 3,918 in Bank of America on September 2, 2024 and sell it today you would earn a total of 833.00 from holding Bank of America or generate 21.26% 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. Schwab Dividend Equity
Performance |
| Timeline |
| Bank of America |
| Schwab Dividend Equity |
Bank of America and Schwab Dividend Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Schwab Dividend
The main advantage of trading using opposite Bank of America and Schwab Dividend positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Schwab Dividend 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 Schwab Dividend will offset losses from the drop in Schwab Dividend's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Schwab Dividend vs. Vanguard High Dividend | Schwab Dividend vs. JPMorgan Equity Premium | Schwab Dividend vs. Vanguard Dividend Appreciation | Schwab Dividend vs. iShares Core Dividend |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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