Correlation Between Bank of America and UBS Group

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

Diversification Opportunities for Bank of America and UBS Group

0.43

Correlation Coefficient

Bank of America  UBS Group

Very weak diversification

The 3 months correlation between Bank and UBS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and UBS Group AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UBS Group AG 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 UBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UBS Group AG has no effect on the direction of Bank of America i.e., Bank of America and UBS Group go up and down completely randomly.

Pair Corralation between Bank of America and UBS Group

Assuming the 90 days trading horizon Bank of America is expected to generate 7.24 times less return on investment than UBS Group. But when comparing it to its historical volatility, Bank of America is 2.1 times less risky than UBS Group. It trades about 0.16 of its potential returns per unit of risk. UBS Group AG is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest  2,981  in UBS Group AG on October 20, 2024 and sell it today you would earn a total of  423.00  from holding UBS Group AG or generate 14.19% return on investment over 90 days.

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

Bank of America  vs.  UBS Group AG

Bank of America

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Bank of America is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

UBS Group AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UBS Group AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, UBS Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and UBS Group

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

The idea behind Bank of America and UBS Group AG 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.