Correlation Between Bank of America and Precious Metals

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

Diversification Opportunities for Bank of America and Precious Metals

-0.26

Correlation Coefficient

Bank of America  Precious Metals

Very good diversification

The 3 months correlation between Bank and Precious is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Precious Metals And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precious Metals And 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 Precious Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precious Metals And has no effect on the direction of Bank of America i.e., Bank of America and Precious Metals go up and down completely randomly.

Pair Corralation between Bank of America and Precious Metals

Assuming the 90 days trading horizon Bank of America is expected to generate 0.76 times more return on investment than Precious Metals. However, Bank of America is 1.32 times less risky than Precious Metals. It trades about 0.11 of its potential returns per unit of risk. Precious Metals And is currently generating about -0.06 per unit of risk. If you would invest  2,070  in Bank of America on September 23, 2024 and sell it today you would earn a total of  229.00  from holding Bank of America or generate 11.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  Precious Metals And

Bank of America

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Precious Metals And

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precious Metals And has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank of America and Precious Metals

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

The idea behind Bank of America and Precious Metals And 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.