Correlation Between Procter Gamble and Bank of America
Can any of the company-specific risk be diversified away by investing in both Procter Gamble 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 Procter Gamble 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 The Procter Gamble and Bank of America, you can compare the effects of market volatilities on Procter Gamble 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 Procter Gamble with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Bank of America.
Diversification Opportunities for Procter Gamble and Bank of America
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Procter and Bank is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding The Procter Gamble 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 Procter Gamble 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 The Procter Gamble 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 Procter Gamble i.e., Procter Gamble and Bank of America go up and down completely randomly.
Pair Corralation between Procter Gamble and Bank of America
Assuming the 90 days trading horizon Procter Gamble is expected to generate 1.72 times less return on investment than Bank of America. But when comparing it to its historical volatility, The Procter Gamble is 1.25 times less risky than Bank of America. It trades about 0.05 of its potential returns per unit of risk. Bank of America is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,170 in Bank of America on August 27, 2024 and sell it today you would earn a total of 2,671 from holding Bank of America or generate 64.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
The Procter Gamble vs. Bank of America
Performance |
| Timeline |
| Procter Gamble |
| Bank of America |
Procter Gamble and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Bank of America
The main advantage of trading using opposite Procter Gamble and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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.| Procter Gamble vs. Verizon Communications | Procter Gamble vs. Micron Technology | Procter Gamble vs. Southwest Airlines Co | Procter Gamble vs. Align Technology |
| Bank of America vs. MAHLE Metal Leve | Bank of America vs. Metalurgica Gerdau SA | Bank of America vs. Cognizant Technology Solutions | Bank of America vs. Align Technology |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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