Correlation Between Bank of America and Wasatch Small
Can any of the company-specific risk be diversified away by investing in both Bank of America and Wasatch Small 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 Wasatch Small 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 Wasatch Small Cap, you can compare the effects of market volatilities on Bank of America and Wasatch Small 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 Wasatch Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Wasatch Small.
Diversification Opportunities for Bank of America and Wasatch Small
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Wasatch is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Wasatch Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wasatch Small Cap 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 Wasatch Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wasatch Small Cap has no effect on the direction of Bank of America i.e., Bank of America and Wasatch Small go up and down completely randomly.
Pair Corralation between Bank of America and Wasatch Small
Considering the 90-day investment horizon Bank of America is expected to under-perform the Wasatch Small. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.15 times less risky than Wasatch Small. The stock trades about -0.31 of its potential returns per unit of risk. The Wasatch Small Cap is currently generating about -0.25 of returns per unit of risk over similar time horizon. If you would invest 1,035 in Wasatch Small Cap on November 27, 2024 and sell it today you would lose (54.00) from holding Wasatch Small Cap or give up 5.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Wasatch Small Cap
Performance |
| Timeline |
| Bank of America |
| Wasatch Small Cap |
Bank of America and Wasatch Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Wasatch Small
The main advantage of trading using opposite Bank of America and Wasatch Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Wasatch Small 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 Wasatch Small will offset losses from the drop in Wasatch Small'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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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