Correlation Between Bank of America and Western Asset
Can any of the company-specific risk be diversified away by investing in both Bank of America and Western Asset 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 Western Asset 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 Western Asset Investment, you can compare the effects of market volatilities on Bank of America and Western Asset 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 Western Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Western Asset.
Diversification Opportunities for Bank of America and Western Asset
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Western is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Western Asset Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Investment 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Investment has no effect on the direction of Bank of America i.e., Bank of America and Western Asset go up and down completely randomly.
Pair Corralation between Bank of America and Western Asset
Assuming the 90 days trading horizon Bank of America is expected to generate 1.29 times more return on investment than Western Asset. However, Bank of America is 1.29 times more volatile than Western Asset Investment. It trades about 0.18 of its potential returns per unit of risk. Western Asset Investment is currently generating about -0.1 per unit of risk. If you would invest 2,235 in Bank of America on August 28, 2024 and sell it today you would earn a total of 56.00 from holding Bank of America or generate 2.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Western Asset Investment
Performance |
| Timeline |
| Bank of America |
| Western Asset Investment |
Bank of America and Western Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Western Asset
The main advantage of trading using opposite Bank of America and Western Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Western Asset 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 Western Asset will offset losses from the drop in Western Asset'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 |
| Western Asset vs. Pioneer Floating Rate | Western Asset vs. The Gabelli Equity | Western Asset vs. Pioneer Municipal High | Western Asset vs. Nuveen Global High |
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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