Correlation Between Bank of America and MORGAN

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Can any of the company-specific risk be diversified away by investing in both Bank of America and MORGAN 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 MORGAN 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 MORGAN STANLEY 3125, you can compare the effects of market volatilities on Bank of America and MORGAN 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 MORGAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and MORGAN.

Diversification Opportunities for Bank of America and MORGAN

-0.22
  Correlation Coefficient

Very good diversification

The 3 months correlation between Bank and MORGAN is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and MORGAN STANLEY 3125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MORGAN STANLEY 3125 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 MORGAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MORGAN STANLEY 3125 has no effect on the direction of Bank of America i.e., Bank of America and MORGAN go up and down completely randomly.

Pair Corralation between Bank of America and MORGAN

Considering the 90-day investment horizon Bank of America is expected to generate 2.25 times more return on investment than MORGAN. However, Bank of America is 2.25 times more volatile than MORGAN STANLEY 3125. It trades about 0.27 of its potential returns per unit of risk. MORGAN STANLEY 3125 is currently generating about -0.19 per unit of risk. If you would invest  4,389  in Bank of America on October 22, 2024 and sell it today you would earn a total of  264.00  from holding Bank of America or generate 6.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Bank of America  vs.  MORGAN STANLEY 3125

 Performance 
       Timeline  
Bank of America 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in February 2025.
MORGAN STANLEY 3125 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days MORGAN STANLEY 3125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MORGAN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Bank of America and MORGAN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bank of America and MORGAN

The main advantage of trading using opposite Bank of America and MORGAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, MORGAN 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 MORGAN will offset losses from the drop in MORGAN's long position.
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The idea behind Bank of America and MORGAN STANLEY 3125 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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