Correlation Between Bank of America and BCE
Can any of the company-specific risk be diversified away by investing in both Bank of America and BCE 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 BCE 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 BCE Inc, you can compare the effects of market volatilities on Bank of America and BCE 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 BCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and BCE.
Diversification Opportunities for Bank of America and BCE
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and BCE is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and BCE Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCE 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 BCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCE Inc has no effect on the direction of Bank of America i.e., Bank of America and BCE go up and down completely randomly.
Pair Corralation between Bank of America and BCE
Assuming the 90 days trading horizon Bank of America is expected to generate 0.89 times more return on investment than BCE. However, Bank of America is 1.12 times less risky than BCE. It trades about 0.18 of its potential returns per unit of risk. BCE Inc is currently generating about 0.12 per unit of risk. If you would invest 2,303 in Bank of America on November 3, 2024 and sell it today you would earn a total of 102.00 from holding Bank of America or generate 4.43% 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. BCE Inc
Performance |
| Timeline |
| Bank of America |
| BCE Inc |
Bank of America and BCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and BCE
The main advantage of trading using opposite Bank of America and BCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, BCE 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 BCE will offset losses from the drop in BCE's long position.| Bank of America vs. Champion Iron | Bank of America vs. BluMetric Environmental | Bank of America vs. Hemisphere Energy | Bank of America vs. Bird Construction |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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