Correlation Between Bank of America and Arion Banki

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

Diversification Opportunities for Bank of America and Arion Banki

-0.07

Correlation Coefficient

Bank of America  Arion Banki

Good diversification

The 3 months correlation between Bank and Arion is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Arion banki hf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arion banki hf 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 Arion Banki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arion banki hf has no effect on the direction of Bank of America i.e., Bank of America and Arion Banki go up and down completely randomly.

Pair Corralation between Bank of America and Arion Banki

Considering the 90-day investment horizon Bank of America is expected to under-perform the Arion Banki. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.15 times less risky than Arion Banki. The stock trades about -0.01 of its potential returns per unit of risk. The Arion banki hf is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,260  in Arion banki hf on December 1, 2024 and sell it today you would earn a total of  35.00  from holding Arion banki hf or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Bank of America  vs.  Arion banki hf

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 rather sound basic indicators, Bank of America is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arion banki hf

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arion banki hf are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Arion Banki is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and Arion Banki

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

The idea behind Bank of America and Arion banki hf 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.