Correlation Between Bank of America and Ab Sustainable
Can any of the company-specific risk be diversified away by investing in both Bank of America and Ab Sustainable 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 Ab Sustainable 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 Ab Sustainable Thematic, you can compare the effects of market volatilities on Bank of America and Ab Sustainable 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 Ab Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Ab Sustainable.
Diversification Opportunities for Bank of America and Ab Sustainable
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and SUTAX is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Ab Sustainable Thematic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Sustainable Thematic 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 Ab Sustainable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Sustainable Thematic has no effect on the direction of Bank of America i.e., Bank of America and Ab Sustainable go up and down completely randomly.
Pair Corralation between Bank of America and Ab Sustainable
Considering the 90-day investment horizon Bank of America is expected to generate 1.84 times more return on investment than Ab Sustainable. However, Bank of America is 1.84 times more volatile than Ab Sustainable Thematic. It trades about 0.11 of its potential returns per unit of risk. Ab Sustainable Thematic is currently generating about 0.1 per unit of risk. If you would invest 2,648 in Bank of America on August 31, 2024 and sell it today you would earn a total of 2,129 from holding Bank of America or generate 80.4% 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. Ab Sustainable Thematic
Performance |
| Timeline |
| Bank of America |
| Ab Sustainable Thematic |
Bank of America and Ab Sustainable Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Ab Sustainable
The main advantage of trading using opposite Bank of America and Ab Sustainable positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Ab Sustainable 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 Ab Sustainable will offset losses from the drop in Ab Sustainable'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 |
| Ab Sustainable vs. Oppenheimer International Diversified | Ab Sustainable vs. Pioneer Diversified High | Ab Sustainable vs. Huber Capital Diversified | Ab Sustainable vs. Harbor Diversified International |
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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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