Correlation Between Bank of America and Large Company
Can any of the company-specific risk be diversified away by investing in both Bank of America and Large Company 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 Large Company 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 Large Pany Value, you can compare the effects of market volatilities on Bank of America and Large Company 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 Large Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Large Company.
Diversification Opportunities for Bank of America and Large Company
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Large is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Large Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Pany 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 Large Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Pany Value has no effect on the direction of Bank of America i.e., Bank of America and Large Company go up and down completely randomly.
Pair Corralation between Bank of America and Large Company
Considering the 90-day investment horizon Bank of America is expected to generate 1.99 times more return on investment than Large Company. However, Bank of America is 1.99 times more volatile than Large Pany Value. It trades about 0.1 of its potential returns per unit of risk. Large Pany Value is currently generating about 0.09 per unit of risk. If you would invest 3,883 in Bank of America on August 25, 2024 and sell it today you would earn a total of 817.00 from holding Bank of America or generate 21.04% 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. Large Pany Value
Performance |
| Timeline |
| Bank of America |
| Large Pany Value |
Bank of America and Large Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Large Company
The main advantage of trading using opposite Bank of America and Large Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Large Company 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 Large Company will offset losses from the drop in Large Company'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 |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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