Correlation Between Bank of America and Columbia Seligman
Can any of the company-specific risk be diversified away by investing in both Bank of America and Columbia Seligman 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 Columbia Seligman 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 Columbia Seligman Global, you can compare the effects of market volatilities on Bank of America and Columbia Seligman 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 Columbia Seligman. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Columbia Seligman.
Diversification Opportunities for Bank of America and Columbia Seligman
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Columbia is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Columbia Seligman Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Seligman Global 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 Columbia Seligman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Seligman Global has no effect on the direction of Bank of America i.e., Bank of America and Columbia Seligman go up and down completely randomly.
Pair Corralation between Bank of America and Columbia Seligman
Considering the 90-day investment horizon Bank of America is expected to generate 1.05 times less return on investment than Columbia Seligman. In addition to that, Bank of America is 1.2 times more volatile than Columbia Seligman Global. It trades about 0.06 of its total potential returns per unit of risk. Columbia Seligman Global is currently generating about 0.08 per unit of volatility. If you would invest 5,192 in Columbia Seligman Global on September 3, 2024 and sell it today you would earn a total of 3,073 from holding Columbia Seligman Global or generate 59.19% 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. Columbia Seligman Global
Performance |
| Timeline |
| Bank of America |
| Columbia Seligman Global |
Bank of America and Columbia Seligman Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Columbia Seligman
The main advantage of trading using opposite Bank of America and Columbia Seligman positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Columbia Seligman 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 Columbia Seligman will offset losses from the drop in Columbia Seligman's long position.| Bank of America vs. Partner Communications | Bank of America vs. Merck Company | Bank of America vs. Western Midstream Partners | Bank of America vs. Edgewise Therapeutics |
| Columbia Seligman vs. Us Government Securities | Columbia Seligman vs. Dunham Porategovernment Bond | Columbia Seligman vs. Lord Abbett Government | Columbia Seligman vs. Government Securities Fund |
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 Stocks Directory module to find actively traded stocks across global markets.
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