Correlation Between Bank of America and VersaBank
Can any of the company-specific risk be diversified away by investing in both Bank of America and VersaBank 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 VersaBank 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 VersaBank, you can compare the effects of market volatilities on Bank of America and VersaBank 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 VersaBank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and VersaBank.
Diversification Opportunities for Bank of America and VersaBank
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and VersaBank is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and VersaBank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VersaBank 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 VersaBank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VersaBank has no effect on the direction of Bank of America i.e., Bank of America and VersaBank go up and down completely randomly.
Pair Corralation between Bank of America and VersaBank
Assuming the 90 days trading horizon Bank of America is expected to generate 1.8 times less return on investment than VersaBank. But when comparing it to its historical volatility, Bank of America is 1.48 times less risky than VersaBank. It trades about 0.13 of its potential returns per unit of risk. VersaBank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,048 in VersaBank on August 24, 2024 and sell it today you would earn a total of 1,338 from holding VersaBank or generate 127.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of America vs. VersaBank
Performance |
| Timeline |
| Bank of America |
| VersaBank |
Bank of America and VersaBank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and VersaBank
The main advantage of trading using opposite Bank of America and VersaBank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, VersaBank 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 VersaBank will offset losses from the drop in VersaBank's long position.| Bank of America vs. Bank of Nova | Bank of America vs. Canadian Banc Corp | Bank of America vs. Bank of Montreal | Bank of America vs. Bluestone Resources |
| VersaBank vs. Sylogist | VersaBank vs. Sangoma Technologies Corp | VersaBank vs. Firan Technology Group | VersaBank vs. Hammond Power Solutions |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |