Correlation Between Bank of America and Banco Bilbao
Can any of the company-specific risk be diversified away by investing in both Bank of America and Banco Bilbao 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 Banco Bilbao 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 Banco Bilbao Vizcaya, you can compare the effects of market volatilities on Bank of America and Banco Bilbao 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 Banco Bilbao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Banco Bilbao.
Diversification Opportunities for Bank of America and Banco Bilbao
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Bank and Banco is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Bank of America i.e., Bank of America and Banco Bilbao go up and down completely randomly.
Pair Corralation between Bank of America and Banco Bilbao
Assuming the 90 days trading horizon Bank of America is expected to generate 2.14 times less return on investment than Banco Bilbao. But when comparing it to its historical volatility, Bank of America is 6.04 times less risky than Banco Bilbao. It trades about 0.13 of its potential returns per unit of risk. Banco Bilbao Vizcaya is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 686.00 in Banco Bilbao Vizcaya on September 4, 2024 and sell it today you would earn a total of 228.00 from holding Banco Bilbao Vizcaya or generate 33.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 73.73% |
| Values | Daily Returns |
Bank of America vs. Banco Bilbao Vizcaya
Performance |
| Timeline |
| Bank of America |
| Banco Bilbao Vizcaya |
Bank of America and Banco Bilbao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Banco Bilbao
The main advantage of trading using opposite Bank of America and Banco Bilbao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Banco Bilbao 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 Banco Bilbao will offset losses from the drop in Banco Bilbao's long position.| Bank of America vs. Bank of America | Bank of America vs. China Construction Bank | Bank of America vs. Bank of America | Bank of America vs. Wells Fargo |
| Banco Bilbao vs. Bank of America | Banco Bilbao vs. Bank of America | Banco Bilbao vs. Agricultural Bank | Banco Bilbao vs. Bank of America |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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