Correlation Between Bank of America and GP Investments
Can any of the company-specific risk be diversified away by investing in both Bank of America and GP Investments 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 GP Investments 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 GP Investments, you can compare the effects of market volatilities on Bank of America and GP Investments 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 GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and GP Investments.
Diversification Opportunities for Bank of America and GP Investments
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and GPIV33 is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Bank of America i.e., Bank of America and GP Investments go up and down completely randomly.
Pair Corralation between Bank of America and GP Investments
Assuming the 90 days trading horizon Bank of America is expected to generate 0.66 times more return on investment than GP Investments. However, Bank of America is 1.53 times less risky than GP Investments. It trades about 0.37 of its potential returns per unit of risk. GP Investments is currently generating about 0.07 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 996.00 from holding Bank of America or generate 16.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. GP Investments
Performance |
| Timeline |
| Bank of America |
| GP Investments |
Bank of America and GP Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and GP Investments
The main advantage of trading using opposite Bank of America and GP Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, GP Investments 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 GP Investments will offset losses from the drop in GP Investments' long position.| Bank of America vs. GP Investments | Bank of America vs. Metalurgica Gerdau SA | Bank of America vs. Spotify Technology SA | Bank of America vs. Warner Music Group |
| GP Investments vs. Global X Funds | GP Investments vs. American Airlines Group | GP Investments vs. Southwest Airlines Co | GP Investments vs. Unity Software |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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