Correlation Between Bank of America and Premium Income
Can any of the company-specific risk be diversified away by investing in both Bank of America and Premium Income 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 Premium Income 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 Premium Income, you can compare the effects of market volatilities on Bank of America and Premium Income 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 Premium Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Premium Income.
Diversification Opportunities for Bank of America and Premium Income
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Premium is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Premium Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Income 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 Premium Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Income has no effect on the direction of Bank of America i.e., Bank of America and Premium Income go up and down completely randomly.
Pair Corralation between Bank of America and Premium Income
Assuming the 90 days trading horizon Bank of America is expected to generate 1.29 times more return on investment than Premium Income. However, Bank of America is 1.29 times more volatile than Premium Income. It trades about 0.08 of its potential returns per unit of risk. Premium Income is currently generating about -0.04 per unit of risk. If you would invest 2,183 in Bank of America on October 14, 2024 and sell it today you would earn a total of 164.00 from holding Bank of America or generate 7.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Premium Income
Performance |
| Timeline |
| Bank of America |
| Premium Income |
Bank of America and Premium Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Premium Income
The main advantage of trading using opposite Bank of America and Premium Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Premium Income 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 Premium Income will offset losses from the drop in Premium Income's long position.| Bank of America vs. Algonquin Power Utilities | Bank of America vs. T2 Metals Corp | Bank of America vs. Dream Office Real | Bank of America vs. Sun Peak Metals |
| Premium Income vs. Sprott Physical Gold | Premium Income vs. Brompton Split Banc | Premium Income vs. TDb Split Corp | Premium Income vs. Prime Dividend Corp |
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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