Correlation Between Bank of America and VanEck Gold

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

Diversification Opportunities for Bank of America and VanEck Gold

0.48

Correlation Coefficient

Bank of America  VanEck Gold

Very weak diversification

The 3 months correlation between Bank and VanEck is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and VanEck Gold Miners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Gold Miners 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 VanEck Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Gold Miners has no effect on the direction of Bank of America i.e., Bank of America and VanEck Gold go up and down completely randomly.

Pair Corralation between Bank of America and VanEck Gold

Considering the 90-day investment horizon Bank of America is expected to under-perform the VanEck Gold. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.6 times less risky than VanEck Gold. The stock trades about -0.1 of its potential returns per unit of risk. The VanEck Gold Miners is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,722  in VanEck Gold Miners on November 28, 2024 and sell it today you would earn a total of  316.00  from holding VanEck Gold Miners or generate 8.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  VanEck Gold Miners

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 unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

VanEck Gold Miners

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Gold Miners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly sluggish fundamental indicators, VanEck Gold may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Bank of America and VanEck Gold

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

The idea behind Bank of America and VanEck Gold Miners 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.