Correlation Between Bank of America and VMG Consumer
Can any of the company-specific risk be diversified away by investing in both Bank of America and VMG Consumer 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 VMG Consumer 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 VMG Consumer Acquisition, you can compare the effects of market volatilities on Bank of America and VMG Consumer 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 VMG Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and VMG Consumer.
Diversification Opportunities for Bank of America and VMG Consumer
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and VMG is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and VMG Consumer Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMG Consumer Acquisition 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 VMG Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMG Consumer Acquisition has no effect on the direction of Bank of America i.e., Bank of America and VMG Consumer go up and down completely randomly.
Pair Corralation between Bank of America and VMG Consumer
If you would invest 4,262 in Bank of America on August 29, 2024 and sell it today you would earn a total of 515.00 from holding Bank of America or generate 12.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 4.35% |
| Values | Daily Returns |
Bank of America vs. VMG Consumer Acquisition
Performance |
| Timeline |
| Bank of America |
| VMG Consumer Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank of America and VMG Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and VMG Consumer
The main advantage of trading using opposite Bank of America and VMG Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, VMG Consumer 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 VMG Consumer will offset losses from the drop in VMG Consumer'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. 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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