Correlation Between Bank of America and Themes Small
Can any of the company-specific risk be diversified away by investing in both Bank of America and Themes Small 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 Themes Small 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 Themes Small Cap, you can compare the effects of market volatilities on Bank of America and Themes Small 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 Themes Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Themes Small.
Diversification Opportunities for Bank of America and Themes Small
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Themes is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Themes Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes Small Cap 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 Themes Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes Small Cap has no effect on the direction of Bank of America i.e., Bank of America and Themes Small go up and down completely randomly.
Pair Corralation between Bank of America and Themes Small
Considering the 90-day investment horizon Bank of America is expected to generate 1.36 times more return on investment than Themes Small. However, Bank of America is 1.36 times more volatile than Themes Small Cap. It trades about 0.27 of its potential returns per unit of risk. Themes Small Cap is currently generating about 0.34 per unit of risk. If you would invest 4,189 in Bank of America on August 26, 2024 and sell it today you would earn a total of 511.00 from holding Bank of America or generate 12.2% 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. Themes Small Cap
Performance |
| Timeline |
| Bank of America |
| Themes Small Cap |
Bank of America and Themes Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Themes Small
The main advantage of trading using opposite Bank of America and Themes Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Themes Small 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 Themes Small will offset losses from the drop in Themes Small's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Themes Small vs. Dimensional ETF Trust | Themes Small vs. Vanguard Small Cap Index | Themes Small vs. First Trust Multi Manager | Themes Small vs. Vanguard SP Small Cap |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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