Correlation Between Bank of America and WBI BullBear
Can any of the company-specific risk be diversified away by investing in both Bank of America and WBI BullBear 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 WBI BullBear 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 WBI BullBear Value, you can compare the effects of market volatilities on Bank of America and WBI BullBear 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 WBI BullBear. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and WBI BullBear.
Diversification Opportunities for Bank of America and WBI BullBear
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and WBI is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and WBI BullBear Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WBI BullBear Value 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 WBI BullBear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WBI BullBear Value has no effect on the direction of Bank of America i.e., Bank of America and WBI BullBear go up and down completely randomly.
Pair Corralation between Bank of America and WBI BullBear
Considering the 90-day investment horizon Bank of America is expected to generate 1.95 times more return on investment than WBI BullBear. However, Bank of America is 1.95 times more volatile than WBI BullBear Value. It trades about 0.12 of its potential returns per unit of risk. WBI BullBear Value is currently generating about 0.06 per unit of risk. If you would invest 3,132 in Bank of America on November 9, 2024 and sell it today you would earn a total of 1,642 from holding Bank of America or generate 52.43% 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. WBI BullBear Value
Performance |
| Timeline |
| Bank of America |
| WBI BullBear Value |
Bank of America and WBI BullBear Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and WBI BullBear
The main advantage of trading using opposite Bank of America and WBI BullBear positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, WBI BullBear 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 WBI BullBear will offset losses from the drop in WBI BullBear'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 |
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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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