Correlation Between Verizon Communications and Bank of America
Can any of the company-specific risk be diversified away by investing in both Verizon Communications 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 Verizon Communications 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 Verizon Communications and Bank of America, you can compare the effects of market volatilities on Verizon Communications 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 Verizon Communications with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verizon Communications and Bank of America.
Diversification Opportunities for Verizon Communications and Bank of America
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Verizon and Bank is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Verizon Communications 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 Verizon Communications 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 Verizon Communications 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 Verizon Communications i.e., Verizon Communications and Bank of America go up and down completely randomly.
Pair Corralation between Verizon Communications and Bank of America
Assuming the 90 days horizon Verizon Communications is expected to generate 8.46 times less return on investment than Bank of America. In addition to that, Verizon Communications is 1.58 times more volatile than Bank of America. It trades about 0.03 of its total potential returns per unit of risk. Bank of America is currently generating about 0.44 per unit of volatility. If you would invest 88,629 in Bank of America on October 20, 2024 and sell it today you would earn a total of 7,870 from holding Bank of America or generate 8.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verizon Communications vs. Bank of America
Performance |
| Timeline |
| Verizon Communications |
| Bank of America |
Verizon Communications and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verizon Communications and Bank of America
The main advantage of trading using opposite Verizon Communications and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verizon Communications 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.| Verizon Communications vs. Micron Technology | Verizon Communications vs. Monster Beverage Corp | Verizon Communications vs. Ameriprise Financial | Verizon Communications vs. CVS Health |
| Bank of America vs. Monster Beverage Corp | Bank of America vs. Verizon Communications | Bank of America vs. Micron Technology | Bank of America vs. New Oriental Education |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities |