Correlation Between Bank of America and Uniteds
Can any of the company-specific risk be diversified away by investing in both Bank of America and Uniteds 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 Uniteds 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 Uniteds Limited, you can compare the effects of market volatilities on Bank of America and Uniteds 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 Uniteds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Uniteds.
Diversification Opportunities for Bank of America and Uniteds
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Uniteds is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Uniteds Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniteds Limited 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 Uniteds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniteds Limited has no effect on the direction of Bank of America i.e., Bank of America and Uniteds go up and down completely randomly.
Pair Corralation between Bank of America and Uniteds
Assuming the 90 days trading horizon Bank of America is expected to generate 3.24 times more return on investment than Uniteds. However, Bank of America is 3.24 times more volatile than Uniteds Limited. It trades about 0.31 of its potential returns per unit of risk. Uniteds Limited is currently generating about 0.24 per unit of risk. If you would invest 2,177 in Bank of America on September 1, 2024 and sell it today you would earn a total of 311.00 from holding Bank of America or generate 14.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. Uniteds Limited
Performance |
| Timeline |
| Bank of America |
| Uniteds Limited |
Bank of America and Uniteds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Uniteds
The main advantage of trading using opposite Bank of America and Uniteds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Uniteds 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 Uniteds will offset losses from the drop in Uniteds' long position.| Bank of America vs. Brookfield Investments | Bank of America vs. Partners Value Investments | Bank of America vs. Labrador Iron Ore | Bank of America vs. Millennium Silver Corp |
| Uniteds vs. Economic Investment Trust | Uniteds vs. Canadian General Investments | Uniteds vs. E L Financial Corp | Uniteds vs. Clairvest Group |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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