Correlation Between Bank of America and SPDR SSgA
Can any of the company-specific risk be diversified away by investing in both Bank of America and SPDR SSgA 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 SPDR SSgA 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 SPDR SSgA Ultra, you can compare the effects of market volatilities on Bank of America and SPDR SSgA 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 SPDR SSgA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SPDR SSgA.
Diversification Opportunities for Bank of America and SPDR SSgA
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and SPDR is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SPDR SSgA Ultra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SSgA Ultra 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 SPDR SSgA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SSgA Ultra has no effect on the direction of Bank of America i.e., Bank of America and SPDR SSgA go up and down completely randomly.
Pair Corralation between Bank of America and SPDR SSgA
Considering the 90-day investment horizon Bank of America is expected to generate 21.26 times more return on investment than SPDR SSgA. However, Bank of America is 21.26 times more volatile than SPDR SSgA Ultra. It trades about 0.11 of its potential returns per unit of risk. SPDR SSgA Ultra is currently generating about 0.31 per unit of risk. If you would invest 2,806 in Bank of America on August 28, 2024 and sell it today you would earn a total of 1,944 from holding Bank of America or generate 69.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. SPDR SSgA Ultra
Performance |
| Timeline |
| Bank of America |
| SPDR SSgA Ultra |
Bank of America and SPDR SSgA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SPDR SSgA
The main advantage of trading using opposite Bank of America and SPDR SSgA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SPDR SSgA 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 SPDR SSgA will offset losses from the drop in SPDR SSgA's long position.| Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Nova |
| SPDR SSgA vs. SPDR Bloomberg Investment | SPDR SSgA vs. SPDR Bloomberg 1 10 | SPDR SSgA vs. iShares Short Maturity | SPDR SSgA vs. Invesco Ultra Short |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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