Correlation Between Bank of America and Corporativo GBM

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

Diversification Opportunities for Bank of America and Corporativo GBM

-0.37

Correlation Coefficient

Bank of America  Corporativo GBM

Very good diversification

The 3 months correlation between Bank and Corporativo is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Corporativo GBM SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporativo GBM SAB 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 Corporativo GBM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporativo GBM SAB has no effect on the direction of Bank of America i.e., Bank of America and Corporativo GBM go up and down completely randomly.

Pair Corralation between Bank of America and Corporativo GBM

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Corporativo GBM. In addition to that, Bank of America is 1.87 times more volatile than Corporativo GBM SAB. It trades about -0.06 of its total potential returns per unit of risk. Corporativo GBM SAB is currently generating about 0.01 per unit of volatility. If you would invest  995.00  in Corporativo GBM SAB on December 28, 2024 and sell it today you would earn a total of  5.00  from holding Corporativo GBM SAB or generate 0.5% 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.  Corporativo GBM SAB

Bank of America

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of America has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Corporativo GBM SAB

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Corporativo GBM SAB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Corporativo GBM is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of America and Corporativo GBM

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

The idea behind Bank of America and Corporativo GBM SAB 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.