Correlation Between Bank of America and Vanguard Institutional
Can any of the company-specific risk be diversified away by investing in both Bank of America and Vanguard Institutional 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 Institutional 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 Institutional Index, you can compare the effects of market volatilities on Bank of America and Vanguard Institutional 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 Institutional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Vanguard Institutional.
Diversification Opportunities for Bank of America and Vanguard Institutional
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Vanguard is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Vanguard Institutional Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Institutional 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 Institutional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Institutional has no effect on the direction of Bank of America i.e., Bank of America and Vanguard Institutional go up and down completely randomly.
Pair Corralation between Bank of America and Vanguard Institutional
Considering the 90-day investment horizon Bank of America is expected to generate 2.46 times more return on investment than Vanguard Institutional. However, Bank of America is 2.46 times more volatile than Vanguard Institutional Index. It trades about 0.21 of its potential returns per unit of risk. Vanguard Institutional Index is currently generating about 0.15 per unit of risk. If you would invest 4,234 in Bank of America on August 24, 2024 and sell it today you would earn a total of 412.00 from holding Bank of America or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Vanguard Institutional Index
Performance |
| Timeline |
| Bank of America |
| Vanguard Institutional |
Bank of America and Vanguard Institutional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Vanguard Institutional
The main advantage of trading using opposite Bank of America and Vanguard Institutional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Vanguard Institutional 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 Institutional will offset losses from the drop in Vanguard Institutional's long position.| Bank of America vs. Amtech Systems | Bank of America vs. Gold Fields Ltd | Bank of America vs. Aegean Airlines SA | Bank of America vs. Merck Company |
| Vanguard Institutional vs. Vanguard Extended Market | Vanguard Institutional vs. Vanguard Total Bond | Vanguard Institutional vs. Vanguard Total Bond | Vanguard Institutional vs. Vanguard Extended Market |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |