Are you really shorting B of A (NYSE:BAC) based on its volatility?
 | By Ellen Johnson | Macroaxis Story |
B of A is generating 0.5387% of daily returns assuming volatility of 2.6334% on return distribution over 60 days investment horizon. Since many greedy investors are excited about financial services space, let's go over B of A against its current volatility. We will evaluate if B of A's current volatility will continue into February.
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Reviewed by Vlad Skutelnik
Bank Of America has roughly 815.05 B in cash with 42.5 B of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 94.22, which can makes it an attractive takeover target, given it will continue generating positive cash flow. 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.
How important is Bank of America's Liquidity
Bank of America financial leverage refers to using borrowed capital as a funding source to finance Bank of America ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Bank of America financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Bank of America's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Bank of America's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Bank of America's total debt and its cash.
Bank of America Gross Profit
Bank of America Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Bank of America previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Bank of America Gross Profit growth over the last 10 years. Please check Bank of America's gross profit and other fundamental indicators for more details.
Bank of America Volatility Drivers
Bank of America unsystematic risk is unique to Bank of America and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Bank of America you can also buy Citigroup. You can also mitigate this risk by investing in the financials sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Bank of America important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Bank of America income statement and balance sheet. Here are more details about Bank volatility.Click cells to compare fundamentals
Breaking down Bank of America Indicators
The current price rise of Bank Of America could raise concerns from investors as the firm it trading at a share price of 33.01 on very low momentum in volume. The company management teams may have good odds in positioning the firm resources to exploit market volatility in February. The stock standard deviation of daily returns for 30 days investing horizon is currently 2.63. The current volatility is consistent with the ongoing market swings in December 2020 as well as with B of A unsystematic, company-specific events.
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