Correlation Between Bank of America and Aviation Links
Can any of the company-specific risk be diversified away by investing in both Bank of America and Aviation Links 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 America and Aviation Links into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Aviation Links, you can compare the effects of market volatilities on Bank of America and Aviation Links 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 America with a short position of Aviation Links. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Aviation Links.
Diversification Opportunities for Bank of America and Aviation Links
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Aviation is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Aviation Links in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aviation Links and Bank of America 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 America are associated (or correlated) with Aviation Links. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aviation Links has no effect on the direction of Bank of America i.e., Bank of America and Aviation Links go up and down completely randomly.
Pair Corralation between Bank of America and Aviation Links
Considering the 90-day investment horizon Bank of America is expected to generate 6.23 times less return on investment than Aviation Links. But when comparing it to its historical volatility, Bank of America is 1.16 times less risky than Aviation Links. It trades about 0.12 of its potential returns per unit of risk. Aviation Links is currently generating about 0.66 of returns per unit of risk over similar time horizon. If you would invest 125,000 in Aviation Links on January 25, 2024 and sell it today you would earn a total of 28,700 from holding Aviation Links or generate 22.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 77.27% |
| Values | Daily Returns |
Bank of America vs. Aviation Links
Performance |
| Timeline |
| Bank of America |
| Aviation Links |
Bank of America and Aviation Links Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Aviation Links
The main advantage of trading using opposite Bank of America and Aviation Links positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Aviation Links 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 Aviation Links will offset losses from the drop in Aviation Links' long position.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
| Aviation Links vs. Clal Insurance Enterprises | Aviation Links vs. Israel Discount Bank | Aviation Links vs. Bezeq Israeli Telecommunication | Aviation Links vs. Alony Hetz Properties |
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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