Correlation Between Bank of America and Standard Life

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

Diversification Opportunities for Bank of America and Standard Life

-0.72

Correlation Coefficient

Bank of America  Standard Life

Pay attention - limited upside

The 3 months correlation between Bank and Standard is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Standard Life Aberdeen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Standard Life Aberdeen 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 Standard Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Standard Life Aberdeen has no effect on the direction of Bank of America i.e., Bank of America and Standard Life go up and down completely randomly.

Pair Corralation between Bank of America and Standard Life

Considering the 90-day investment horizon Bank of America is expected to under-perform the Standard Life. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.1 times less risky than Standard Life. The stock trades about -0.18 of its potential returns per unit of risk. The Standard Life Aberdeen is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  710.00  in Standard Life Aberdeen on October 7, 2024 and sell it today you would lose (3.00) from holding Standard Life Aberdeen or give up 0.42% of portfolio value over 90 days.

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

Bank of America  vs.  Standard Life Aberdeen

Bank of America

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Standard Life Aberdeen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Standard Life Aberdeen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bank of America and Standard Life

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

The idea behind Bank of America and Standard Life Aberdeen 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.