Correlation Between Bank of America and AMEREN

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Can any of the company-specific risk be diversified away by investing in both Bank of America and AMEREN 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 AMEREN 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 AMEREN P 365, you can compare the effects of market volatilities on Bank of America and AMEREN 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 AMEREN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and AMEREN.

Diversification Opportunities for Bank of America and AMEREN

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and AMEREN is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and AMEREN P 365 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMEREN P 365 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 AMEREN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMEREN P 365 has no effect on the direction of Bank of America i.e., Bank of America and AMEREN go up and down completely randomly.

Pair Corralation between Bank of America and AMEREN

Considering the 90-day investment horizon Bank of America is expected to generate 3.03 times more return on investment than AMEREN. However, Bank of America is 3.03 times more volatile than AMEREN P 365. It trades about 0.06 of its potential returns per unit of risk. AMEREN P 365 is currently generating about 0.02 per unit of risk. If you would invest  3,114  in Bank of America on August 28, 2024 and sell it today you would earn a total of  1,636  from holding Bank of America or generate 52.54% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy52.32%
ValuesDaily Returns

Bank of America  vs.  AMEREN P 365

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.
AMEREN P 365 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days AMEREN P 365 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AMEREN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bank of America and AMEREN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and AMEREN

The main advantage of trading using opposite Bank of America and AMEREN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, AMEREN 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 AMEREN will offset losses from the drop in AMEREN's long position.
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The idea behind Bank of America and AMEREN P 365 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Global Correlations module to find global opportunities by holding instruments from different markets.

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