Correlation Between Bank of America and Value Fund

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

Diversification Opportunities for Bank of America and Value Fund

0.02

Correlation Coefficient

Bank of America  Value Fund

Significant diversification

The 3 months correlation between Bank and Value is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Value Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Investor 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Investor has no effect on the direction of Bank of America i.e., Bank of America and Value Fund go up and down completely randomly.

Pair Corralation between Bank of America and Value Fund

Considering the 90-day investment horizon Bank of America is expected to under-perform the Value Fund. In addition to that, Bank of America is 2.2 times more volatile than Value Fund Investor. It trades about -0.03 of its total potential returns per unit of risk. Value Fund Investor is currently generating about 0.08 per unit of volatility. If you would invest  773.00  in Value Fund Investor on December 27, 2024 and sell it today you would earn a total of  27.00  from holding Value Fund Investor or generate 3.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Bank of America  vs.  Value Fund Investor

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

Value Fund Investor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund Investor are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Value Fund 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 Value Fund

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

The idea behind Bank of America and Value Fund Investor 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.