Correlation Between Bank of America and Vertiv Holdings
Can any of the company-specific risk be diversified away by investing in both Bank of America and Vertiv Holdings 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 Vertiv Holdings 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 Vertiv Holdings Co, you can compare the effects of market volatilities on Bank of America and Vertiv Holdings 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 Vertiv Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Vertiv Holdings.
Diversification Opportunities for Bank of America and Vertiv Holdings
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Vertiv is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Vertiv Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertiv Holdings 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 Vertiv Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertiv Holdings has no effect on the direction of Bank of America i.e., Bank of America and Vertiv Holdings go up and down completely randomly.
Pair Corralation between Bank of America and Vertiv Holdings
Considering the 90-day investment horizon Bank of America is expected to generate 1.38 times less return on investment than Vertiv Holdings. But when comparing it to its historical volatility, Bank of America is 2.11 times less risky than Vertiv Holdings. It trades about 0.27 of its potential returns per unit of risk. Vertiv Holdings Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 11,361 in Vertiv Holdings Co on August 29, 2024 and sell it today you would earn a total of 1,813 from holding Vertiv Holdings Co or generate 15.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Vertiv Holdings Co
Performance |
| Timeline |
| Bank of America |
| Vertiv Holdings |
Bank of America and Vertiv Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Vertiv Holdings
The main advantage of trading using opposite Bank of America and Vertiv Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Vertiv Holdings 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 Vertiv Holdings will offset losses from the drop in Vertiv Holdings' 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 |
| Vertiv Holdings vs. nVent Electric PLC | Vertiv Holdings vs. Hubbell | Vertiv Holdings vs. Advanced Energy Industries | Vertiv Holdings vs. Energizer Holdings |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |