Correlation Between Bank of America and VelocityShares
Can any of the company-specific risk be diversified away by investing in both Bank of America and VelocityShares 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 VelocityShares 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 VelocityShares 3x Long, you can compare the effects of market volatilities on Bank of America and VelocityShares 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 VelocityShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and VelocityShares.
Diversification Opportunities for Bank of America and VelocityShares
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Bank and VelocityShares is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and VelocityShares 3x Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VelocityShares 3x Long 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 VelocityShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VelocityShares 3x Long has no effect on the direction of Bank of America i.e., Bank of America and VelocityShares go up and down completely randomly.
Pair Corralation between Bank of America and VelocityShares
Considering the 90-day investment horizon Bank of America is expected to generate 0.28 times more return on investment than VelocityShares. However, Bank of America is 3.55 times less risky than VelocityShares. It trades about 0.1 of its potential returns per unit of risk. VelocityShares 3x Long is currently generating about 0.02 per unit of risk. If you would invest 2,824 in Bank of America on September 1, 2024 and sell it today you would earn a total of 1,927 from holding Bank of America or generate 68.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 8.33% |
| Values | Daily Returns |
Bank of America vs. VelocityShares 3x Long
Performance |
| Timeline |
| Bank of America |
| VelocityShares 3x Long |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank of America and VelocityShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and VelocityShares
The main advantage of trading using opposite Bank of America and VelocityShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, VelocityShares 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 VelocityShares will offset losses from the drop in VelocityShares' long position.| Bank of America vs. Citigroup | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of | Bank of America vs. JPMorgan Chase Co |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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