Correlation Between Bank of America and Voya Prime
Can any of the company-specific risk be diversified away by investing in both Bank of America and Voya Prime 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 Voya Prime 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 Voya Prime Rate, you can compare the effects of market volatilities on Bank of America and Voya Prime 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 Voya Prime. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Voya Prime.
Diversification Opportunities for Bank of America and Voya Prime
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Voya is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Voya Prime Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Voya Prime Rate 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 Voya Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Voya Prime Rate has no effect on the direction of Bank of America i.e., Bank of America and Voya Prime go up and down completely randomly.
Pair Corralation between Bank of America and Voya Prime
Considering the 90-day investment horizon Bank of America is expected to generate 2.33 times more return on investment than Voya Prime. However, Bank of America is 2.33 times more volatile than Voya Prime Rate. It trades about 0.1 of its potential returns per unit of risk. Voya Prime Rate is currently generating about 0.15 per unit of risk. If you would invest 3,938 in Bank of America on September 1, 2024 and sell it today you would earn a total of 813.00 from holding Bank of America or generate 20.64% 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. Voya Prime Rate
Performance |
| Timeline |
| Bank of America |
| Voya Prime Rate |
Bank of America and Voya Prime Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Voya Prime
The main advantage of trading using opposite Bank of America and Voya Prime positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Voya Prime 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 Voya Prime will offset losses from the drop in Voya Prime's long position.| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Bank of Montreal |
| Voya Prime vs. Vanguard Total Stock | Voya Prime vs. Vanguard 500 Index | Voya Prime vs. Vanguard Total Stock | Voya Prime vs. Vanguard Total Stock |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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