Correlation Between Bank of America and ProShares UltraShort
Can any of the company-specific risk be diversified away by investing in both Bank of America and ProShares UltraShort 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 ProShares UltraShort 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 ProShares UltraShort Basic, you can compare the effects of market volatilities on Bank of America and ProShares UltraShort 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 ProShares UltraShort. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and ProShares UltraShort.
Diversification Opportunities for Bank of America and ProShares UltraShort
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and ProShares is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and ProShares UltraShort Basic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares UltraShort 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 ProShares UltraShort. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares UltraShort has no effect on the direction of Bank of America i.e., Bank of America and ProShares UltraShort go up and down completely randomly.
Pair Corralation between Bank of America and ProShares UltraShort
Considering the 90-day investment horizon Bank of America is expected to generate 0.86 times more return on investment than ProShares UltraShort. However, Bank of America is 1.17 times less risky than ProShares UltraShort. It trades about 0.14 of its potential returns per unit of risk. ProShares UltraShort Basic is currently generating about -0.07 per unit of risk. If you would invest 2,756 in Bank of America on September 1, 2024 and sell it today you would earn a total of 1,995 from holding Bank of America or generate 72.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. ProShares UltraShort Basic
Performance |
| Timeline |
| Bank of America |
| ProShares UltraShort |
Bank of America and ProShares UltraShort Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and ProShares UltraShort
The main advantage of trading using opposite Bank of America and ProShares UltraShort positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, ProShares UltraShort 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 ProShares UltraShort will offset losses from the drop in ProShares UltraShort'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 |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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