Correlation Between Bank of America and Prudential Qma
Can any of the company-specific risk be diversified away by investing in both Bank of America and Prudential Qma 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 Prudential Qma 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 Prudential Qma Mid Cap, you can compare the effects of market volatilities on Bank of America and Prudential Qma 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 Prudential Qma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Prudential Qma.
Diversification Opportunities for Bank of America and Prudential Qma
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Prudential is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Prudential Qma Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Qma Mid 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 Prudential Qma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Qma Mid has no effect on the direction of Bank of America i.e., Bank of America and Prudential Qma go up and down completely randomly.
Pair Corralation between Bank of America and Prudential Qma
Considering the 90-day investment horizon Bank of America is expected to generate 2.17 times more return on investment than Prudential Qma. However, Bank of America is 2.17 times more volatile than Prudential Qma Mid Cap. It trades about 0.27 of its potential returns per unit of risk. Prudential Qma Mid Cap is currently generating about 0.27 per unit of risk. If you would invest 4,262 in Bank of America on August 29, 2024 and sell it today you would earn a total of 513.00 from holding Bank of America or generate 12.04% 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. Prudential Qma Mid Cap
Performance |
| Timeline |
| Bank of America |
| Prudential Qma Mid |
Bank of America and Prudential Qma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Prudential Qma
The main advantage of trading using opposite Bank of America and Prudential Qma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Prudential Qma 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 Prudential Qma will offset losses from the drop in Prudential Qma's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Nova |
| Prudential Qma vs. Prudential Jennison Servative | Prudential Qma vs. Prudential Jennison Equity | Prudential Qma vs. Prudential Jennison Small | Prudential Qma vs. Prudential Total Return |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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