Correlation Between Bank of America and 194162AS2

Can any of the company-specific risk be diversified away by investing in both Bank of America and 194162AS2 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 194162AS2 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 CL 46 01 MAR 33, you can compare the effects of market volatilities on Bank of America and 194162AS2 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 194162AS2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and 194162AS2.

Diversification Opportunities for Bank of America and 194162AS2

-0.71

Correlation Coefficient

Bank of America  194162AS2

Pay attention - limited upside

The 3 months correlation between Bank and 194162AS2 is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and CL 46 01 MAR 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 194162AS2 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 194162AS2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 194162AS2 has no effect on the direction of Bank of America i.e., Bank of America and 194162AS2 go up and down completely randomly.

Pair Corralation between Bank of America and 194162AS2

Considering the 90-day investment horizon Bank of America is expected to under-perform the 194162AS2. In addition to that, Bank of America is 1.08 times more volatile than CL 46 01 MAR 33. It trades about -0.27 of its total potential returns per unit of risk. CL 46 01 MAR 33 is currently generating about 0.01 per unit of volatility. If you would invest  10,221  in CL 46 01 MAR 33 on September 25, 2024 and sell it today you would earn a total of  10.00  from holding CL 46 01 MAR 33 or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Bank of America  vs.  CL 46 01 MAR 33

Bank of America

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

194162AS2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CL 46 01 MAR 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 194162AS2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of America and 194162AS2

The main advantage of trading using opposite Bank of America and 194162AS2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, 194162AS2 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 194162AS2 will offset losses from the drop in 194162AS2's long position.

The idea behind Bank of America and CL 46 01 MAR 33 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.