Correlation Between Bank of America and V

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

Diversification Opportunities for Bank of America and V

0.0

Correlation Coefficient

Bank of America  V

Pay attention - limited upside

The 3 months correlation between Bank and V is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and V Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V Group 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 V. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V Group has no effect on the direction of Bank of America i.e., Bank of America and V go up and down completely randomly.

Pair Corralation between Bank of America and V

Considering the 90-day investment horizon Bank of America is expected to generate 23.89 times less return on investment than V. But when comparing it to its historical volatility, Bank of America is 15.63 times less risky than V. It trades about 0.06 of its potential returns per unit of risk. V Group is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.03  in V Group on September 12, 2024 and sell it today you would lose (0.02) from holding V Group or give up 66.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Bank of America  vs.  V Group

Bank of America

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

V Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days V Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, V is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bank of America and V

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

The idea behind Bank of America and V Group 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.