Correlation Between Bank of America and Adobe
Can any of the company-specific risk be diversified away by investing in both Bank of America and Adobe 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 Adobe 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 Adobe Inc, you can compare the effects of market volatilities on Bank of America and Adobe 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 Adobe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Adobe.
Diversification Opportunities for Bank of America and Adobe
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and Adobe is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Adobe Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adobe Inc 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 Adobe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adobe Inc has no effect on the direction of Bank of America i.e., Bank of America and Adobe go up and down completely randomly.
Pair Corralation between Bank of America and Adobe
Assuming the 90 days trading horizon Bank of America is expected to generate 0.92 times more return on investment than Adobe. However, Bank of America is 1.08 times less risky than Adobe. It trades about -0.01 of its potential returns per unit of risk. Adobe Inc is currently generating about -0.56 per unit of risk. If you would invest 6,937 in Bank of America on October 14, 2024 and sell it today you would lose (34.00) from holding Bank of America or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Adobe Inc
Performance |
| Timeline |
| Bank of America |
| Adobe Inc |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bank of America and Adobe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Adobe
The main advantage of trading using opposite Bank of America and Adobe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Adobe 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 Adobe will offset losses from the drop in Adobe's long position.| Bank of America vs. Check Point Software | Bank of America vs. United Natural Foods, | Bank of America vs. Marfrig Global Foods | Bank of America vs. Pure Storage, |
| Adobe vs. Check Point Software | Adobe vs. Darden Restaurants, | Adobe vs. BIONTECH SE DRN | Adobe vs. Tyler Technologies, |
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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