Correlation Between Bank of America and Grupo Financiero

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

Diversification Opportunities for Bank of America and Grupo Financiero

-0.27

Correlation Coefficient

Bank of America  Grupo Financiero

Very good diversification

The 3 months correlation between Bank and Grupo is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Grupo Financiero Inbursa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Financiero Inbursa 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 Grupo Financiero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Financiero Inbursa has no effect on the direction of Bank of America i.e., Bank of America and Grupo Financiero go up and down completely randomly.

Pair Corralation between Bank of America and Grupo Financiero

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Grupo Financiero. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.1 times less risky than Grupo Financiero. The stock trades about -0.03 of its potential returns per unit of risk. The Grupo Financiero Inbursa is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,306  in Grupo Financiero Inbursa on December 28, 2024 and sell it today you would earn a total of  409.00  from holding Grupo Financiero Inbursa or generate 9.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Bank of America  vs.  Grupo Financiero Inbursa

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 fairly strong fundamental indicators, Bank of America is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grupo Financiero Inbursa

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Financiero Inbursa are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Grupo Financiero may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Bank of America and Grupo Financiero

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

The idea behind Bank of America and Grupo Financiero Inbursa 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.