Correlation Between Bank of America and Guggenheim Market

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

Diversification Opportunities for Bank of America and Guggenheim Market

0.77

Correlation Coefficient

Bank of America  Guggenheim Market

Poor diversification

The 3 months correlation between Bank and Guggenheim is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Guggenheim Market Neutral in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guggenheim Market Neutral 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 Guggenheim Market. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guggenheim Market Neutral has no effect on the direction of Bank of America i.e., Bank of America and Guggenheim Market go up and down completely randomly.

Pair Corralation between Bank of America and Guggenheim Market

If you would invest  2,169  in Guggenheim Market Neutral on December 29, 2024 and sell it today you would earn a total of  0.00  from holding Guggenheim Market Neutral or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	24.59%
Values	Daily Returns

Bank of America  vs.  Guggenheim Market Neutral

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Guggenheim Market Neutral

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guggenheim Market Neutral has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Guggenheim Market is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of America and Guggenheim Market

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

The idea behind Bank of America and Guggenheim Market Neutral 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.