Correlation Between Sprott Focus and Bank of America
Can any of the company-specific risk be diversified away by investing in both Sprott Focus and Bank of America 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 Sprott Focus and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprott Focus Trust and Bank of America, you can compare the effects of market volatilities on Sprott Focus and Bank of America 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 Sprott Focus with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprott Focus and Bank of America.
Diversification Opportunities for Sprott Focus and Bank of America
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sprott and Bank is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Sprott Focus 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 Sprott Focus Trust are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Sprott Focus i.e., Sprott Focus and Bank of America go up and down completely randomly.
Pair Corralation between Sprott Focus and Bank of America
Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.77 times more return on investment than Bank of America. However, Sprott Focus Trust is 1.3 times less risky than Bank of America. It trades about 0.16 of its potential returns per unit of risk. Bank of America is currently generating about 0.07 per unit of risk. If you would invest 798.00 in Sprott Focus Trust on September 13, 2024 and sell it today you would earn a total of 18.00 from holding Sprott Focus Trust or generate 2.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Sprott Focus Trust vs. Bank of America
Performance |
| Timeline |
| Sprott Focus Trust |
| Bank of America |
Sprott Focus and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprott Focus and Bank of America
The main advantage of trading using opposite Sprott Focus and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Focus position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Sprott Focus vs. MFS Investment Grade | Sprott Focus vs. Eaton Vance National | Sprott Focus vs. Nuveen California Select | Sprott Focus vs. Federated Premier Municipal |
| Bank of America vs. Citigroup | Bank of America vs. Nu Holdings | Bank of America vs. HSBC Holdings PLC | Bank of America vs. Canadian Imperial Bank |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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