Correlation Between Bank of America and United States
Can any of the company-specific risk be diversified away by investing in both Bank of America and United States 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 United States 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 United States Oil, you can compare the effects of market volatilities on Bank of America and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and United States.
Diversification Opportunities for Bank of America and United States
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and United is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and United States Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Oil 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Oil has no effect on the direction of Bank of America i.e., Bank of America and United States go up and down completely randomly.
Pair Corralation between Bank of America and United States
Considering the 90-day investment horizon Bank of America is expected to generate 1.61 times more return on investment than United States. However, Bank of America is 1.61 times more volatile than United States Oil. It trades about 0.12 of its potential returns per unit of risk. United States Oil is currently generating about 0.13 per unit of risk. If you would invest 3,686 in Bank of America on January 25, 2024 and sell it today you would earn a total of 151.00 from holding Bank of America or generate 4.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Bank of America vs. United States Oil
Performance |
| Timeline |
| Bank of America |
| United States Oil |
Bank of America and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and United States
The main advantage of trading using opposite Bank of America and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' 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 |
| United States vs. United States Natural | United States vs. SPDR Gold Shares | United States vs. ProShares Ultra Bloomberg | United States vs. Energy Select Sector |
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.
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