Correlation Between Bank of America and Union Bankshares
Can any of the company-specific risk be diversified away by investing in both Bank of America and Union Bankshares 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 Union Bankshares 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 Union Bankshares, you can compare the effects of market volatilities on Bank of America and Union Bankshares 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 Union Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Union Bankshares.
Diversification Opportunities for Bank of America and Union Bankshares
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Union is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Union Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bankshares 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 Union Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bankshares has no effect on the direction of Bank of America i.e., Bank of America and Union Bankshares go up and down completely randomly.
Pair Corralation between Bank of America and Union Bankshares
Considering the 90-day investment horizon Bank of America is expected to generate 1.07 times less return on investment than Union Bankshares. But when comparing it to its historical volatility, Bank of America is 1.59 times less risky than Union Bankshares. It trades about 0.1 of its potential returns per unit of risk. Union Bankshares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,094 in Union Bankshares on August 31, 2024 and sell it today you would earn a total of 1,346 from holding Union Bankshares or generate 64.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Union Bankshares
Performance |
| Timeline |
| Bank of America |
| Union Bankshares |
Bank of America and Union Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Union Bankshares
The main advantage of trading using opposite Bank of America and Union Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Union Bankshares 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 Union Bankshares will offset losses from the drop in Union Bankshares' 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 |
| Union Bankshares vs. Home Bancorp | Union Bankshares vs. Rhinebeck Bancorp | Union Bankshares vs. LINKBANCORP | Union Bankshares vs. Magyar Bancorp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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