Correlation Between Bank of NT and Bank of America
Can any of the company-specific risk be diversified away by investing in both Bank of NT 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 Bank of NT 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 Bank of NT and Bank of America, you can compare the effects of market volatilities on Bank of NT 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 Bank of NT with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of NT and Bank of America.
Diversification Opportunities for Bank of NT and Bank of America
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bank and Bank is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Bank of NT 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 Bank of NT 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 NT 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 Bank of NT i.e., Bank of NT and Bank of America go up and down completely randomly.
Pair Corralation between Bank of NT and Bank of America
Considering the 90-day investment horizon Bank of NT is expected to generate 1.98 times more return on investment than Bank of America. However, Bank of NT is 1.98 times more volatile than Bank of America. It trades about 0.04 of its potential returns per unit of risk. Bank of America is currently generating about -0.11 per unit of risk. If you would invest 3,725 in Bank of NT on August 29, 2024 and sell it today you would earn a total of 45.00 from holding Bank of NT or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bank of NT vs. Bank of America
Performance |
| Timeline |
| Bank of NT |
| Bank of America |
Bank of NT and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of NT and Bank of America
The main advantage of trading using opposite Bank of NT and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of NT 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.| Bank of NT vs. PJT Partners | Bank of NT vs. National Bank Holdings | Bank of NT vs. FB Financial Corp | Bank of NT vs. Northrim BanCorp |
| Bank of America vs. JPMorgan Chase Co | Bank of America vs. Wells Fargo | Bank of America vs. JPMorgan Chase Co | Bank of America vs. Wells Fargo |
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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