Correlation Between Bank of America and Vanguard LifeStrategy
Can any of the company-specific risk be diversified away by investing in both Bank of America and Vanguard LifeStrategy 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 Vanguard LifeStrategy 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 Vanguard LifeStrategy 20, you can compare the effects of market volatilities on Bank of America and Vanguard LifeStrategy 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 Vanguard LifeStrategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Vanguard LifeStrategy.
Diversification Opportunities for Bank of America and Vanguard LifeStrategy
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Vanguard is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Vanguard LifeStrategy 20 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard LifeStrategy 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 Vanguard LifeStrategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard LifeStrategy has no effect on the direction of Bank of America i.e., Bank of America and Vanguard LifeStrategy go up and down completely randomly.
Pair Corralation between Bank of America and Vanguard LifeStrategy
Considering the 90-day investment horizon Bank of America is expected to under-perform the Vanguard LifeStrategy. In addition to that, Bank of America is 1.5 times more volatile than Vanguard LifeStrategy 20. It trades about -0.16 of its total potential returns per unit of risk. Vanguard LifeStrategy 20 is currently generating about -0.02 per unit of volatility. If you would invest 2,244 in Vanguard LifeStrategy 20 on September 18, 2024 and sell it today you would lose (7.00) from holding Vanguard LifeStrategy 20 or give up 0.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. Vanguard LifeStrategy 20
Performance |
| Timeline |
| Bank of America |
| Vanguard LifeStrategy |
Bank of America and Vanguard LifeStrategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Vanguard LifeStrategy
The main advantage of trading using opposite Bank of America and Vanguard LifeStrategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Vanguard LifeStrategy 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 Vanguard LifeStrategy will offset losses from the drop in Vanguard LifeStrategy'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 |
| Vanguard LifeStrategy vs. Vanguard SP 500 | Vanguard LifeStrategy vs. SPDR Dow Jones | Vanguard LifeStrategy vs. iShares Core MSCI | Vanguard LifeStrategy vs. iShares SP 500 |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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