Correlation Between Bank of America and Hampton Financial
Can any of the company-specific risk be diversified away by investing in both Bank of America and Hampton Financial 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 Hampton Financial 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 Hampton Financial Corp, you can compare the effects of market volatilities on Bank of America and Hampton Financial 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 Hampton Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Hampton Financial.
Diversification Opportunities for Bank of America and Hampton Financial
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bank and Hampton is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Hampton Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hampton Financial Corp 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 Hampton Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hampton Financial Corp has no effect on the direction of Bank of America i.e., Bank of America and Hampton Financial go up and down completely randomly.
Pair Corralation between Bank of America and Hampton Financial
Assuming the 90 days trading horizon Bank of America is expected to under-perform the Hampton Financial. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 2.29 times less risky than Hampton Financial. The stock trades about -0.07 of its potential returns per unit of risk. The Hampton Financial Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 41.00 in Hampton Financial Corp on October 12, 2024 and sell it today you would earn a total of 3.00 from holding Hampton Financial Corp or generate 7.32% 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. Hampton Financial Corp
Performance |
| Timeline |
| Bank of America |
| Hampton Financial Corp |
Bank of America and Hampton Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Hampton Financial
The main advantage of trading using opposite Bank of America and Hampton Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Hampton Financial 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 Hampton Financial will offset losses from the drop in Hampton Financial's long position.| Bank of America vs. Western Copper and | Bank of America vs. Advent Wireless | Bank of America vs. WELL Health Technologies | Bank of America vs. Wilmington Capital Management |
| Hampton Financial vs. JPMorgan Chase Co | Hampton Financial vs. Bank of America | Hampton Financial vs. Toronto Dominion Bank | Hampton Financial vs. Royal Bank of |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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