Correlation Between Bank of America and Blue Whale

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

Diversification Opportunities for Bank of America and Blue Whale

0.93

Correlation Coefficient

Bank of America  Blue Whale

Almost no diversification

The 3 months correlation between Bank and Blue is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Blue Whale Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Whale Acquisition 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 Blue Whale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Whale Acquisition has no effect on the direction of Bank of America i.e., Bank of America and Blue Whale go up and down completely randomly.

Pair Corralation between Bank of America and Blue Whale

If you would invest  4,064  in Bank of America on September 19, 2024 and sell it today you would earn a total of  441.00  from holding Bank of America or generate 10.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	1.59%
Values	Daily Returns

Bank of America  vs.  Blue Whale Acquisition

Bank of America

Risk-Adjusted Performance

8 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blue Whale Acquisition

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Whale Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Blue Whale is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and Blue Whale

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

The idea behind Bank of America and Blue Whale Acquisition 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.