Bank of America (Peru) Volatility
| BAC Stock | 46.95 0.00 0.00% |
Bank of America appears to be very steady, given 3 months investment horizon. Bank of America secures Sharpe Ratio (or Efficiency) of 0.21, which signifies that the company had a 0.21% return per unit of risk over the last 3 months. By analyzing Bank of America's technical indicators, you can evaluate if the expected return of 0.54% is justified by implied risk. Please makes use of Bank of America's Risk Adjusted Performance of 0.1207, downside deviation of 2.33, and Mean Deviation of 1.68 to double-check if our risk estimates are consistent with your expectations.
Bank |
Bank of America Stock volatility depicts how high the prices fluctuate around the mean (or its average) price. In other words, it is a statistical measure of the distribution of Bank daily returns, and it is calculated using variance and standard deviation. We also use Bank's beta, its sensitivity to the market, as well as its odds of financial distress to provide a more practical estimation of Bank of America volatility.
Since volatility provides investors with entry points to take advantage of stock prices, companies, such as Bank of America can benefit from it. Downward market volatility can be a perfect environment for investors who play the long game. Here, they may decide to buy additional stocks of Bank of America at lower prices. For example, an investor can purchase Bank stock that has halved in price over a short period. This will lower your average cost per share, thereby improving your portfolio's performance when the markets normalize. Similarly, when the prices of Bank of America's stock rises, investors can sell out and invest the proceeds in other equities with better opportunities. Investing when markets are volatile with better valuations will accord both investors and companies the opportunity to generate better long-term returns.
Moving against Bank Stock
| 0.63 | BVN | Compania de Minas | PairCorr |
| 0.58 | LUSURC1 | Luz del Sur | PairCorr |
| 0.39 | NEXAPEC1 | Nexa Resources Peru | PairCorr |
Bank of America Market Sensitivity And Downside Risk
Bank of America's beta coefficient measures the volatility of Bank stock compared to the systematic risk of the entire market represented by your selected benchmark. In mathematical terms, beta represents the slope of the line through a regression of data points where each of these points represents Bank stock's returns against your selected market. In other words, Bank of America's beta of 1.06 provides an investor with an approximation of how much risk Bank of America stock can potentially add to one of your existing portfolios. Bank of America currently demonstrates below-average downside deviation. It has Information Ratio of 0.1 and Jensen Alpha of 0.25. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Bank of America's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Bank of America's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different financial instruments as prices fall.
3 Months Beta |Analyze Bank of America Demand TrendCheck current 90 days Bank of America correlation with market (Dow Jones Industrial)Bank Beta |
Bank standard deviation measures the daily dispersion of prices over your selected time horizon relative to its mean. A typical volatile entity has a high standard deviation, while the deviation of a stable instrument is usually low. As a downside, the standard deviation calculates all uncertainty as risk, even when it is in your favor, such as above-average returns.
Standard Deviation | 2.57 |
It is essential to understand the difference between upside risk (as represented by Bank of America's standard deviation) and the downside risk, which can be measured by semi-deviation or downside deviation of Bank of America's daily returns or price. Since the actual investment returns on holding a position in bank stock tend to have a non-normal distribution, there will be different probabilities for losses than for gains. The likelihood of losses is reflected in the downside risk of an investment in Bank of America.
Bank of America Stock Volatility Analysis
Volatility refers to the frequency at which Bank of America stock price increases or decreases within a specified period. These fluctuations usually indicate the level of risk that's associated with Bank of America's price changes. Investors will then calculate the volatility of Bank of America's stock to predict their future moves. A stock that has erratic price changes quickly hits new highs, and lows are considered highly volatile. A stock with relatively stable price changes has low volatility. A highly volatile stock is riskier, but the risk cuts both ways. Investing in highly volatile security can either be highly successful, or you may experience significant failure. There are two main types of Bank of America's volatility:
Historical Volatility
This type of stock volatility measures Bank of America's fluctuations based on previous trends. It's commonly used to predict Bank of America's future behavior based on its past. However, it cannot conclusively determine the future direction of the stock.Implied Volatility
This type of volatility provides a positive outlook on future price fluctuations for Bank of America's current market price. This means that the stock will return to its initially predicted market price. This type of volatility can be derived from derivative instruments written on Bank of America's to be redeemed at a future date.Transformation |
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Bank of America Projected Return Density Against Market
Assuming the 90 days trading horizon the stock has the beta coefficient of 1.0575 suggesting Bank of America market returns are highly reactive to returns on the market. As the market goes up or down, Bank of America is expected to follow.Most traded equities are subject to two types of risk - systematic (i.e., market) and unsystematic (i.e., nonmarket or company-specific) risk. Unsystematic risk is the risk that events specific to Bank of America or Banks sector will adversely affect the stock's price. This type of risk can be diversified away by owning several different stocks in different industries whose stock prices have shown a small correlation to each other. On the other hand, systematic risk is the risk that Bank of America's price will be affected by overall stock market movements and cannot be diversified away. So, no matter how many positions you have, you cannot eliminate market risk. However, you can measure a Bank stock's historical response to market movements and buy it if you are comfortable with its volatility direction. Beta and standard deviation are two commonly used measures to help you make the right decision.
Bank of America has an alpha of 0.2512, implying that it can generate a 0.25 percent excess return over Dow Jones Industrial after adjusting for the inherited market risk (beta). Predicted Return Density |
| Returns |
What Drives a Bank of America Price Volatility?
Several factors can influence a stock's market volatility:Industry
Specific events can influence volatility within a particular industry. For instance, a significant weather upheaval in a crucial oil-production site may cause oil prices to increase in the oil sector. The direct result will be the rise in the stock price of oil distribution companies. Similarly, any government regulation in a specific industry could negatively influence stock prices due to increased regulations on compliance that may impact the company's future earnings and growth.Political and Economic environment
When governments make significant decisions regarding trade agreements, policies, and legislation regarding specific industries, they will influence stock prices. Everything from speeches to elections may influence investors, who can directly influence the stock prices in any particular industry. The prevailing economic situation also plays a significant role in stock prices. When the economy is doing well, investors will have a positive reaction and hence, better stock prices and vice versa.The Company's Performance
Sometimes volatility will only affect an individual company. For example, a revolutionary product launch or strong earnings report may attract many investors to purchase the company. This positive attention will raise the company's stock price. In contrast, product recalls and data breaches may negatively influence a company's stock prices.Bank of America Stock Risk Measures
Assuming the 90 days trading horizon the coefficient of variation of Bank of America is 474.99. The daily returns are distributed with a variance of 6.62 and standard deviation of 2.57. The mean deviation of Bank of America is currently at 1.77. For similar time horizon, the selected benchmark (Dow Jones Industrial) has volatility of 0.76
α | Alpha over Dow Jones | 0.25 | |
β | Beta against Dow Jones | 1.06 | |
σ | Overall volatility | 2.57 | |
Ir | Information ratio | 0.10 |
Bank of America Stock Return Volatility
Bank of America historical daily return volatility represents how much of Bank of America stock's daily returns swing around its mean - it is a statistical measure of its dispersion of returns. The firm accepts 2.5724% volatility on return distribution over the 90 days horizon. By contrast, Dow Jones Industrial accepts 0.7608% volatility on return distribution over the 90 days horizon. Performance |
| Timeline |
About Bank of America Volatility
Volatility is a rate at which the price of Bank of America or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Bank of America may increase or decrease. In other words, similar to Bank's beta indicator, it measures the risk of Bank of America and helps estimate the fluctuations that may happen in a short period of time. So if prices of Bank of America fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility.
Please read more on our technical analysis page.3 ways to utilize Bank of America's volatility to invest better
Higher Bank of America's stock volatility means that the price of its stock is changing rapidly and unpredictably, while lower stock volatility indicates that the price of Bank of America stock is relatively stable. Investors and traders use stock volatility as an indicator of risk and potential reward, as stocks with higher volatility can offer the potential for more significant returns but also come with a greater risk of losses. Bank of America stock volatility can provide helpful information for making investment decisions in the following ways:- Measuring Risk: Volatility can be used as a measure of risk, which can help you determine the potential fluctuations in the value of Bank of America investment. A higher volatility means higher risk and potentially larger changes in value.
- Identifying Opportunities: High volatility in Bank of America's stock can indicate that there is potential for significant price movements, either up or down, which could present investment opportunities.
- Diversification: Understanding how the volatility of Bank of America's stock relates to your other investments can help you create a well-diversified portfolio of assets with varying levels of risk.
Bank of America Investment Opportunity
Bank of America has a volatility of 2.57 and is 3.38 times more volatile than Dow Jones Industrial. Compared to the overall equity markets, volatility of historical daily returns of Bank of America is lower than 22 percent of all global equities and portfolios over the last 90 days. You can use Bank of America to protect your portfolios against small market fluctuations. The stock experiences a normal downward trend, but the immediate impact on correlations cannot be determined at the moment . Check odds of Bank of America to be traded at 46.48 in 90 days.Weak diversification
The correlation between Bank of America and DJI is 0.33 (i.e., Weak diversification) for selected investment horizon. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and DJI in the same portfolio, assuming nothing else is changed.
Bank of America Additional Risk Indicators
The analysis of Bank of America's secondary risk indicators is one of the essential steps in making a buy or sell decision. The process involves identifying the amount of risk involved in Bank of America's investment and either accepting that risk or mitigating it. Along with some common measures of Bank of America stock's risk such as standard deviation, beta, or value at risk, we also provide a set of secondary indicators that can assist in the individual investment decision or help in hedging the risk of your existing portfolios.
| Risk Adjusted Performance | 0.1207 | |||
| Market Risk Adjusted Performance | 0.347 | |||
| Mean Deviation | 1.68 | |||
| Semi Deviation | 1.59 | |||
| Downside Deviation | 2.33 | |||
| Coefficient Of Variation | 670.1 | |||
| Standard Deviation | 2.46 |
Please note, the risk measures we provide can be used independently or collectively to perform a risk assessment. When comparing two potential stocks, we recommend comparing similar stocks with homogenous growth potential and valuation from related markets to determine which investment holds the most risk.
Bank of America Suggested Diversification Pairs
Pair trading is one of the very effective strategies used by professional day traders and hedge funds capitalizing on short-time and mid-term market inefficiencies. The approach is based on the fact that the ratio of prices of two correlating shares is long-term stable and oscillates around the average value. If the correlation ratio comes outside the common area, you can speculate with a high success rate that the ratio will return to the mean value and collect a profit.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Bank of America as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Bank of America's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Bank of America's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Bank of America.
Additional Information and Resources on Investing in Bank Stock
When determining whether Bank of America offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Bank of America's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Bank Of America Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Bank Of America Stock:Check out Trending Equities to better understand how to build diversified portfolios. Also, note that the market value of any company could be closely tied with the direction of predictive economic indicators such as signals in bureau of economic analysis. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Please note, there is a significant difference between Bank of America's value and its price as these two are different measures arrived at by different means. Investors typically determine if Bank of America is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Bank of America's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.