Correlation Between Bank of America and SP Global
Can any of the company-specific risk be diversified away by investing in both Bank of America and SP Global 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 SP Global 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 SP Global, you can compare the effects of market volatilities on Bank of America and SP Global 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 SP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SP Global.
Diversification Opportunities for Bank of America and SP Global
-0.28 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and SPGI is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of Bank of America i.e., Bank of America and SP Global go up and down completely randomly.
Pair Corralation between Bank of America and SP Global
Considering the 90-day investment horizon Bank of America is expected to generate 1.41 times more return on investment than SP Global. However, Bank of America is 1.41 times more volatile than SP Global. It trades about 0.12 of its potential returns per unit of risk. SP Global is currently generating about 0.08 per unit of risk. If you would invest 3,335 in Bank of America on August 28, 2024 and sell it today you would earn a total of 1,415 from holding Bank of America or generate 42.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. SP Global
Performance |
| Timeline |
| Bank of America |
| SP Global |
Bank of America and SP Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SP Global
The main advantage of trading using opposite Bank of America and SP Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SP Global 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 SP Global will offset losses from the drop in SP Global's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal | Bank of America vs. Bank of Nova |
| SP Global vs. Dun Bradstreet Holdings | SP Global vs. Moodys | SP Global vs. MSCI Inc | SP Global vs. Nasdaq Inc |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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