Correlation Between Bank of America and Volvo AB

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

Diversification Opportunities for Bank of America and Volvo AB

-0.42

Correlation Coefficient

Bank of America  Volvo AB

Very good diversification

The 3 months correlation between Bank and Volvo is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Volvo AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ser 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 Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB ser has no effect on the direction of Bank of America i.e., Bank of America and Volvo AB go up and down completely randomly.

Pair Corralation between Bank of America and Volvo AB

Considering the 90-day investment horizon Bank of America is expected to under-perform the Volvo AB. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.38 times less risky than Volvo AB. The stock trades about -0.02 of its potential returns per unit of risk. The Volvo AB ser is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,444  in Volvo AB ser on December 26, 2024 and sell it today you would earn a total of  676.00  from holding Volvo AB ser or generate 27.66% return on investment over 90 days.

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

Bank of America  vs.  Volvo AB ser

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.

Volvo AB ser

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volvo AB ser are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Volvo AB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Volvo AB

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

The idea behind Bank of America and Volvo AB ser 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.