Correlation Between Bank of America and RCABS
Can any of the company-specific risk be diversified away by investing in both Bank of America and RCABS 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 RCABS 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 RCABS Inc, you can compare the effects of market volatilities on Bank of America and RCABS 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 RCABS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and RCABS.
Diversification Opportunities for Bank of America and RCABS
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and RCABS is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and RCABS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCABS Inc 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 RCABS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCABS Inc has no effect on the direction of Bank of America i.e., Bank of America and RCABS go up and down completely randomly.
Pair Corralation between Bank of America and RCABS
Considering the 90-day investment horizon Bank of America is expected to under-perform the RCABS. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 8.02 times less risky than RCABS. The stock trades about -0.02 of its potential returns per unit of risk. The RCABS Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 0.08 in RCABS Inc on December 27, 2024 and sell it today you would lose (0.03) from holding RCABS Inc or give up 37.5% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 98.36% |
Values | Daily Returns |
Bank of America vs. RCABS Inc
Performance |
Timeline |
Bank of America |
RCABS Inc |
Bank of America and RCABS Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and RCABS
The main advantage of trading using opposite Bank of America and RCABS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, RCABS 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 RCABS will offset losses from the drop in RCABS's long position.Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. Royal Bank of |
Check out your portfolio center.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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
Equity Valuation Check real value of public entities based on technical and fundamental data | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance |