Correlation Between Bank of America and Thompson Midcap
Can any of the company-specific risk be diversified away by investing in both Bank of America and Thompson Midcap 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 Thompson Midcap 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 Thompson Midcap Fund, you can compare the effects of market volatilities on Bank of America and Thompson Midcap 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 Thompson Midcap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Thompson Midcap.
Diversification Opportunities for Bank of America and Thompson Midcap
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and Thompson is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Thompson Midcap Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thompson Midcap 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 Thompson Midcap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thompson Midcap has no effect on the direction of Bank of America i.e., Bank of America and Thompson Midcap go up and down completely randomly.
Pair Corralation between Bank of America and Thompson Midcap
Considering the 90-day investment horizon Bank of America is expected to under-perform the Thompson Midcap. In addition to that, Bank of America is 1.09 times more volatile than Thompson Midcap Fund. It trades about -0.34 of its total potential returns per unit of risk. Thompson Midcap Fund is currently generating about -0.1 per unit of volatility. If you would invest 1,403 in Thompson Midcap Fund on November 28, 2024 and sell it today you would lose (27.00) from holding Thompson Midcap Fund or give up 1.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Thompson Midcap Fund
Performance |
| Timeline |
| Bank of America |
| Thompson Midcap |
Bank of America and Thompson Midcap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Thompson Midcap
The main advantage of trading using opposite Bank of America and Thompson Midcap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Thompson Midcap 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 Thompson Midcap will offset losses from the drop in Thompson Midcap's long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| Thompson Midcap vs. Thompson Largecap Fund | Thompson Midcap vs. Thompson Bond Fund | Thompson Midcap vs. Crm Smallmid Cap | Thompson Midcap vs. Perkins Select Value |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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