Correlation Between Bank of America and SPDR BB
Can any of the company-specific risk be diversified away by investing in both Bank of America and SPDR BB 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 BB 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 BB SB, you can compare the effects of market volatilities on Bank of America and SPDR BB 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 BB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and SPDR BB.
Diversification Opportunities for Bank of America and SPDR BB
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Bank and SPDR is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and SPDR BB SB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR BB SB 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 BB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR BB SB has no effect on the direction of Bank of America i.e., Bank of America and SPDR BB go up and down completely randomly.
Pair Corralation between Bank of America and SPDR BB
Considering the 90-day investment horizon Bank of America is expected to under-perform the SPDR BB. In addition to that, Bank of America is 2.5 times more volatile than SPDR BB SB. It trades about -0.34 of its total potential returns per unit of risk. SPDR BB SB is currently generating about 0.17 per unit of volatility. If you would invest 2,615 in SPDR BB SB on November 28, 2024 and sell it today you would earn a total of 35.00 from holding SPDR BB SB or generate 1.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. SPDR BB SB
Performance |
| Timeline |
| Bank of America |
| SPDR BB SB |
Bank of America and SPDR BB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and SPDR BB
The main advantage of trading using opposite Bank of America and SPDR BB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, SPDR BB 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 BB will offset losses from the drop in SPDR BB'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 |
| SPDR BB vs. SPDR MSCI World | SPDR BB vs. SPDR SP Dividend | SPDR BB vs. SPDR SP 500 | SPDR BB vs. SPDR MSCI World |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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