Correlation Between Bank of America and Wellington Shields
Can any of the company-specific risk be diversified away by investing in both Bank of America and Wellington Shields 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 Wellington Shields 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 Wellington Shields All Cap, you can compare the effects of market volatilities on Bank of America and Wellington Shields 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 Wellington Shields. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Wellington Shields.
Diversification Opportunities for Bank of America and Wellington Shields
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Wellington is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Wellington Shields All Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wellington Shields All 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 Wellington Shields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wellington Shields All has no effect on the direction of Bank of America i.e., Bank of America and Wellington Shields go up and down completely randomly.
Pair Corralation between Bank of America and Wellington Shields
Considering the 90-day investment horizon Bank of America is expected to generate 1.84 times more return on investment than Wellington Shields. However, Bank of America is 1.84 times more volatile than Wellington Shields All Cap. It trades about 0.06 of its potential returns per unit of risk. Wellington Shields All Cap is currently generating about 0.08 per unit of risk. If you would invest 3,113 in Bank of America on August 31, 2024 and sell it today you would earn a total of 1,664 from holding Bank of America or generate 53.45% 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. Wellington Shields All Cap
Performance |
| Timeline |
| Bank of America |
| Wellington Shields All |
Bank of America and Wellington Shields Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Wellington Shields
The main advantage of trading using opposite Bank of America and Wellington Shields positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Wellington Shields 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 Wellington Shields will offset losses from the drop in Wellington Shields' long position.| Bank of America vs. RLJ Lodging Trust | Bank of America vs. Aquagold International | Bank of America vs. Stepstone Group | Bank of America vs. Morningstar Unconstrained Allocation |
| Wellington Shields vs. Dws Government Money | Wellington Shields vs. Us Government Securities | Wellington Shields vs. John Hancock Government | Wellington Shields vs. Us Government Plus |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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