Correlation Between Bank of America and Schwab Total
Can any of the company-specific risk be diversified away by investing in both Bank of America and Schwab Total 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 Schwab Total 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 Schwab Total Stock, you can compare the effects of market volatilities on Bank of America and Schwab Total 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 Schwab Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Schwab Total.
Diversification Opportunities for Bank of America and Schwab Total
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Schwab is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Schwab Total Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Schwab Total Stock 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 Schwab Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Schwab Total Stock has no effect on the direction of Bank of America i.e., Bank of America and Schwab Total go up and down completely randomly.
Pair Corralation between Bank of America and Schwab Total
Considering the 90-day investment horizon Bank of America is expected to generate 1.04 times less return on investment than Schwab Total. In addition to that, Bank of America is 1.84 times more volatile than Schwab Total Stock. It trades about 0.05 of its total potential returns per unit of risk. Schwab Total Stock is currently generating about 0.1 per unit of volatility. If you would invest 6,684 in Schwab Total Stock on August 25, 2024 and sell it today you would earn a total of 3,496 from holding Schwab Total Stock or generate 52.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Bank of America vs. Schwab Total Stock
Performance |
| Timeline |
| Bank of America |
| Schwab Total Stock |
Bank of America and Schwab Total Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Schwab Total
The main advantage of trading using opposite Bank of America and Schwab Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Schwab Total 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 Schwab Total will offset losses from the drop in Schwab Total's long position.| Bank of America vs. Toronto Dominion Bank | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Schwab Total vs. Us Real Estate | Schwab Total vs. Commonwealth Real Estate | Schwab Total vs. Jhancock Real Estate | Schwab Total vs. Dunham Real Estate |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |