Correlation Between NYSE Composite and Bank of America
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite 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 NYSE Composite and Bank of America, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Bank of America.
Diversification Opportunities for NYSE Composite and Bank of America
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between NYSE and Bank is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Bank of America go up and down completely randomly.
Pair Corralation between NYSE Composite and Bank of America
Assuming the 90 days trading horizon NYSE Composite is expected to generate 0.8 times more return on investment than Bank of America. However, NYSE Composite is 1.25 times less risky than Bank of America. It trades about 0.07 of its potential returns per unit of risk. Bank of America is currently generating about 0.02 per unit of risk. If you would invest 1,599,940 in NYSE Composite on October 25, 2024 and sell it today you would earn a total of 397,938 from holding NYSE Composite or generate 24.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Bank of America
Performance |
| Timeline |
NYSE Composite and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Bank of America
Pair trading matchups for Bank of America
Pair Trading with NYSE Composite and Bank of America
The main advantage of trading using opposite NYSE Composite and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Lindblad Expeditions Holdings | NYSE Composite vs. Proficient Auto Logistics, | NYSE Composite vs. Hafnia Limited | NYSE Composite vs. Arm Holdings plc |
| Bank of America vs. Bank of America | Bank of America vs. Bank of America | 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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