Correlation Between Bank of America and Ameriprise Financial
Can any of the company-specific risk be diversified away by investing in both Bank of America and Ameriprise Financial 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 Ameriprise Financial 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 Ameriprise Financial, you can compare the effects of market volatilities on Bank of America and Ameriprise Financial 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 Ameriprise Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Ameriprise Financial.
Diversification Opportunities for Bank of America and Ameriprise Financial
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Ameriprise is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Ameriprise Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Bank of America i.e., Bank of America and Ameriprise Financial go up and down completely randomly.
Pair Corralation between Bank of America and Ameriprise Financial
Assuming the 90 days trading horizon Bank of America is expected to generate 0.98 times more return on investment than Ameriprise Financial. However, Bank of America is 1.02 times less risky than Ameriprise Financial. It trades about 0.4 of its potential returns per unit of risk. Ameriprise Financial is currently generating about 0.31 per unit of risk. If you would invest 6,136 in Bank of America on August 30, 2024 and sell it today you would earn a total of 1,104 from holding Bank of America or generate 17.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Ameriprise Financial
Performance |
| Timeline |
| Bank of America |
| Ameriprise Financial |
Bank of America and Ameriprise Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Ameriprise Financial
The main advantage of trading using opposite Bank of America and Ameriprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Ameriprise Financial 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 Ameriprise Financial will offset losses from the drop in Ameriprise Financial's long position.| Bank of America vs. Marvell Technology | Bank of America vs. Cognizant Technology Solutions | Bank of America vs. Paycom Software | Bank of America vs. Spotify Technology SA |
| Ameriprise Financial vs. Bread Financial Holdings | Ameriprise Financial vs. Costco Wholesale | Ameriprise Financial vs. Monster Beverage | Ameriprise Financial vs. Lloyds Banking Group |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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