Correlation Between Bank of America and GOLDMAN SACHS
Can any of the company-specific risk be diversified away by investing in both Bank of America and GOLDMAN SACHS 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 GOLDMAN SACHS 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 GOLDMAN SACHS CDR, you can compare the effects of market volatilities on Bank of America and GOLDMAN SACHS 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 GOLDMAN SACHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and GOLDMAN SACHS.
Diversification Opportunities for Bank of America and GOLDMAN SACHS
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bank and GOLDMAN is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and GOLDMAN SACHS CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLDMAN SACHS CDR 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 GOLDMAN SACHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLDMAN SACHS CDR has no effect on the direction of Bank of America i.e., Bank of America and GOLDMAN SACHS go up and down completely randomly.
Pair Corralation between Bank of America and GOLDMAN SACHS
Assuming the 90 days trading horizon Bank of America is expected to under-perform the GOLDMAN SACHS. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.55 times less risky than GOLDMAN SACHS. The stock trades about -0.35 of its potential returns per unit of risk. The GOLDMAN SACHS CDR is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 3,140 in GOLDMAN SACHS CDR on November 28, 2024 and sell it today you would lose (93.00) from holding GOLDMAN SACHS CDR or give up 2.96% 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. GOLDMAN SACHS CDR
Performance |
| Timeline |
| Bank of America |
| GOLDMAN SACHS CDR |
Bank of America and GOLDMAN SACHS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and GOLDMAN SACHS
The main advantage of trading using opposite Bank of America and GOLDMAN SACHS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, GOLDMAN SACHS 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 GOLDMAN SACHS will offset losses from the drop in GOLDMAN SACHS's long position.| Bank of America vs. Canso Credit Trust | Bank of America vs. Sun Life Financial | Bank of America vs. Flow Beverage Corp | Bank of America vs. Canlan Ice Sports |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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