Correlation Between Bank of America and Vanguard Consumer
Can any of the company-specific risk be diversified away by investing in both Bank of America and Vanguard Consumer 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 Vanguard Consumer 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 Vanguard Sumer Staples, you can compare the effects of market volatilities on Bank of America and Vanguard Consumer 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 Vanguard Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Vanguard Consumer.
Diversification Opportunities for Bank of America and Vanguard Consumer
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Vanguard is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Vanguard Sumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Sumer Staples 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 Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Sumer Staples has no effect on the direction of Bank of America i.e., Bank of America and Vanguard Consumer go up and down completely randomly.
Pair Corralation between Bank of America and Vanguard Consumer
Considering the 90-day investment horizon Bank of America is expected to under-perform the Vanguard Consumer. In addition to that, Bank of America is 1.78 times more volatile than Vanguard Sumer Staples. It trades about -0.05 of its total potential returns per unit of risk. Vanguard Sumer Staples is currently generating about 0.05 per unit of volatility. If you would invest 10,405 in Vanguard Sumer Staples on December 28, 2024 and sell it today you would earn a total of 275.00 from holding Vanguard Sumer Staples or generate 2.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 98.36% |
Values | Daily Returns |
Bank of America vs. Vanguard Sumer Staples
Performance |
Timeline |
Bank of America |
Vanguard Sumer Staples |
Bank of America and Vanguard Consumer Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Vanguard Consumer
The main advantage of trading using opposite Bank of America and Vanguard Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Vanguard Consumer 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 Vanguard Consumer will offset losses from the drop in Vanguard Consumer's long position.Bank of America vs. PJT Partners | Bank of America vs. National Bank Holdings | Bank of America vs. FB Financial Corp | Bank of America vs. Northrim BanCorp |
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Check out your portfolio center.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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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