Correlation Between Bank of America and BTB Real
Can any of the company-specific risk be diversified away by investing in both Bank of America and BTB Real 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 BTB Real 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 BTB Real Estate, you can compare the effects of market volatilities on Bank of America and BTB Real 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 BTB Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and BTB Real.
Diversification Opportunities for Bank of America and BTB Real
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and BTB is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and BTB Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTB Real Estate 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 BTB Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTB Real Estate has no effect on the direction of Bank of America i.e., Bank of America and BTB Real go up and down completely randomly.
Pair Corralation between Bank of America and BTB Real
Assuming the 90 days trading horizon Bank of America is expected to generate 1.02 times more return on investment than BTB Real. However, Bank of America is 1.02 times more volatile than BTB Real Estate. It trades about 0.11 of its potential returns per unit of risk. BTB Real Estate is currently generating about -0.05 per unit of risk. If you would invest 2,261 in Bank of America on September 1, 2024 and sell it today you would earn a total of 37.00 from holding Bank of America or generate 1.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. BTB Real Estate
Performance |
| Timeline |
| Bank of America |
| BTB Real Estate |
Bank of America and BTB Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and BTB Real
The main advantage of trading using opposite Bank of America and BTB Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, BTB Real 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 BTB Real will offset losses from the drop in BTB Real's long position.| Bank of America vs. Bank of America | Bank of America vs. Bank of America | Bank of America vs. China Construction Bank | Bank of America vs. Bank of America |
| BTB Real vs. Boston Properties | BTB Real vs. Kilroy Realty Corp | BTB Real vs. SL Green Realty | BTB Real vs. Vornado Realty Trust |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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