Correlation Between Bank of America and SMA Solar
Can any of the company-specific risk be diversified away by investing in both Bank of America and SMA Solar 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 SMA Solar 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 SMA Solar Technology, you can compare the effects of market volatilities on Bank of America and SMA Solar 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 SMA Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SMA Solar.
Diversification Opportunities for Bank of America and SMA Solar
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and SMA is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SMA Solar Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMA Solar Technology 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 SMA Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMA Solar Technology has no effect on the direction of Bank of America i.e., Bank of America and SMA Solar go up and down completely randomly.
Pair Corralation between Bank of America and SMA Solar
Considering the 90-day investment horizon Bank of America is expected to generate 0.54 times more return on investment than SMA Solar. However, Bank of America is 1.84 times less risky than SMA Solar. It trades about 0.29 of its potential returns per unit of risk. SMA Solar Technology is currently generating about -0.29 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 Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. SMA Solar Technology
Performance |
| Timeline |
| Bank of America |
| SMA Solar Technology |
Bank of America and SMA Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SMA Solar
The main advantage of trading using opposite Bank of America and SMA Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SMA Solar 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 SMA Solar will offset losses from the drop in SMA Solar'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 |
| SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Xinyi Solar Holdings | SMA Solar vs. Sunrun Inc | SMA Solar vs. SMA Solar Technology |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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