Correlation Between Bank of America and 6 Meridian
Can any of the company-specific risk be diversified away by investing in both Bank of America and 6 Meridian 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 6 Meridian 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 6 Meridian Quality, you can compare the effects of market volatilities on Bank of America and 6 Meridian 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 6 Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and 6 Meridian.
Diversification Opportunities for Bank of America and 6 Meridian
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and SXQG is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and 6 Meridian Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 6 Meridian Quality 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 6 Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 6 Meridian Quality has no effect on the direction of Bank of America i.e., Bank of America and 6 Meridian go up and down completely randomly.
Pair Corralation between Bank of America and 6 Meridian
Considering the 90-day investment horizon Bank of America is expected to generate 2.21 times more return on investment than 6 Meridian. However, Bank of America is 2.21 times more volatile than 6 Meridian Quality. It trades about 0.31 of its potential returns per unit of risk. 6 Meridian Quality is currently generating about 0.36 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 Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. 6 Meridian Quality
Performance |
| Timeline |
| Bank of America |
| 6 Meridian Quality |
Bank of America and 6 Meridian Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and 6 Meridian
The main advantage of trading using opposite Bank of America and 6 Meridian positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, 6 Meridian 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 6 Meridian will offset losses from the drop in 6 Meridian'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 |
| 6 Meridian vs. Vanguard Growth Index | 6 Meridian vs. iShares Russell 1000 | 6 Meridian vs. iShares SP 500 | 6 Meridian vs. iShares Core SP |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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