Correlation Between Bank of America and Exxon Mobil
Can any of the company-specific risk be diversified away by investing in both Bank of America and Exxon Mobil 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 Exxon Mobil 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 Exxon Mobil, you can compare the effects of market volatilities on Bank of America and Exxon Mobil 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 Exxon Mobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Exxon Mobil.
Diversification Opportunities for Bank of America and Exxon Mobil
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Exxon is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Bank of America i.e., Bank of America and Exxon Mobil go up and down completely randomly.
Pair Corralation between Bank of America and Exxon Mobil
Assuming the 90 days trading horizon Bank of America is expected to generate 1.07 times more return on investment than Exxon Mobil. However, Bank of America is 1.07 times more volatile than Exxon Mobil. It trades about 0.08 of its potential returns per unit of risk. Exxon Mobil is currently generating about 0.05 per unit of risk. If you would invest 4,100 in Bank of America on September 4, 2024 and sell it today you would earn a total of 3,049 from holding Bank of America or generate 74.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Exxon Mobil
Performance |
| Timeline |
| Bank of America |
| Exxon Mobil |
Bank of America and Exxon Mobil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Exxon Mobil
The main advantage of trading using opposite Bank of America and Exxon Mobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Exxon Mobil 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 Exxon Mobil will offset losses from the drop in Exxon Mobil's long position.| Bank of America vs. Citigroup | Bank of America vs. Fundo Investimento Imobiliario | Bank of America vs. Fras le SA | Bank of America vs. Western Digital |
| Exxon Mobil vs. Vale SA | Exxon Mobil vs. Petrleo Brasileiro SA | Exxon Mobil vs. Banco do Brasil | Exxon Mobil vs. Banco Bradesco SA |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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