Correlation Between Bank of America and MYR

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

Diversification Opportunities for Bank of America and MYR

-0.12

Correlation Coefficient

Bank of America  MYR

Good diversification

The 3 months correlation between Bank and MYR is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and MYR Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MYR 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 MYR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MYR Group has no effect on the direction of Bank of America i.e., Bank of America and MYR go up and down completely randomly.

Pair Corralation between Bank of America and MYR

Assuming the 90 days trading horizon Bank of America is expected to generate 4.28 times less return on investment than MYR. But when comparing it to its historical volatility, Bank of America is 3.49 times less risky than MYR. It trades about 0.04 of its potential returns per unit of risk. MYR Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,025  in MYR Group on October 9, 2024 and sell it today you would earn a total of  5,896  from holding MYR Group or generate 65.33% 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.  MYR Group

Bank of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Bank of America is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

MYR Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MYR Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, MYR reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and MYR

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

The idea behind Bank of America and MYR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .