Correlation Between Magna International and Bank of America
Can any of the company-specific risk be diversified away by investing in both Magna International 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 Magna International 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 Magna International and Bank of America, you can compare the effects of market volatilities on Magna International 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 Magna International with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magna International and Bank of America.
Diversification Opportunities for Magna International and Bank of America
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Magna and Bank is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Magna International 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 Magna International 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 Magna International 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 Magna International i.e., Magna International and Bank of America go up and down completely randomly.
Pair Corralation between Magna International and Bank of America
Considering the 90-day investment horizon Magna International is expected to under-perform the Bank of America. In addition to that, Magna International is 3.19 times more volatile than Bank of America. It trades about -0.02 of its total potential returns per unit of risk. Bank of America is currently generating about 0.12 per unit of volatility. If you would invest 1,923 in Bank of America on September 4, 2024 and sell it today you would earn a total of 370.00 from holding Bank of America or generate 19.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Magna International vs. Bank of America
Performance |
| Timeline |
| Magna International |
| Bank of America |
Magna International and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Magna International and Bank of America
The main advantage of trading using opposite Magna International and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magna International 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.| Magna International vs. Allison Transmission Holdings | Magna International vs. Aptiv PLC | Magna International vs. LKQ Corporation | Magna International vs. Lear Corporation |
| Bank of America vs. Wells Fargo | Bank of America vs. Wells Fargo | Bank of America vs. Bank of America | Bank of America vs. Bank of America |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |