Correlation Between Bank of America and State Street
Can any of the company-specific risk be diversified away by investing in both Bank of America and State Street 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 State Street 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 State Street Aggregate, you can compare the effects of market volatilities on Bank of America and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and State Street.
Diversification Opportunities for Bank of America and State Street
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and State is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and State Street Aggregate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Aggregate 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Aggregate has no effect on the direction of Bank of America i.e., Bank of America and State Street go up and down completely randomly.
Pair Corralation between Bank of America and State Street
Considering the 90-day investment horizon Bank of America is expected to generate 5.21 times more return on investment than State Street. However, Bank of America is 5.21 times more volatile than State Street Aggregate. It trades about 0.31 of its potential returns per unit of risk. State Street Aggregate is currently generating about 0.13 per unit of risk. If you would invest 4,182 in Bank of America on September 1, 2024 and sell it today you would earn a total of 569.00 from holding Bank of America or generate 13.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. State Street Aggregate
Performance |
| Timeline |
| Bank of America |
| State Street Aggregate |
Bank of America and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and State Street
The main advantage of trading using opposite Bank of America and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street'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 |
| State Street vs. State Street Target | State Street vs. State Street Target | State Street vs. Ssga International Stock | State Street vs. State Street Target |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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