Correlation Between Bank of America and Barclays PLC
Can any of the company-specific risk be diversified away by investing in both Bank of America and Barclays PLC 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 Barclays PLC 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 Barclays PLC ADR, you can compare the effects of market volatilities on Bank of America and Barclays PLC 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 Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Barclays PLC.
Diversification Opportunities for Bank of America and Barclays PLC
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Barclays is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR 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 Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of Bank of America i.e., Bank of America and Barclays PLC go up and down completely randomly.
Pair Corralation between Bank of America and Barclays PLC
Assuming the 90 days trading horizon Bank of America is expected to generate 2.11 times less return on investment than Barclays PLC. But when comparing it to its historical volatility, Bank of America is 3.96 times less risky than Barclays PLC. It trades about 0.19 of its potential returns per unit of risk. Barclays PLC ADR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,173 in Barclays PLC ADR on August 31, 2024 and sell it today you would earn a total of 150.00 from holding Barclays PLC ADR or generate 12.79% 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. Barclays PLC ADR
Performance |
| Timeline |
| Bank of America |
| Barclays PLC ADR |
Bank of America and Barclays PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Barclays PLC
The main advantage of trading using opposite Bank of America and Barclays PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Barclays PLC 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 Barclays PLC will offset losses from the drop in Barclays PLC's long position.| Bank of America vs. China Construction Bank | Bank of America vs. Bank of America | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America |
| Barclays PLC vs. RLJ Lodging Trust | Barclays PLC vs. Aquagold International | Barclays PLC vs. Stepstone Group | Barclays PLC vs. Morningstar Unconstrained Allocation |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
Other Complementary Tools
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |