Correlation Between Bank of America and IShares Core

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

Diversification Opportunities for Bank of America and IShares Core

0.3

Correlation Coefficient

Bank of America  IShares Core

Weak diversification

The 3 months correlation between Bank and IShares is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Bank of America i.e., Bank of America and IShares Core go up and down completely randomly.

Pair Corralation between Bank of America and IShares Core

Considering the 90-day investment horizon Bank of America is expected to under-perform the IShares Core. In addition to that, Bank of America is 1.58 times more volatile than iShares Core SP. It trades about -0.01 of its total potential returns per unit of risk. iShares Core SP is currently generating about 0.04 per unit of volatility. If you would invest  5,253  in iShares Core SP on December 1, 2024 and sell it today you would earn a total of  86.00  from holding iShares Core SP or generate 1.64% return on investment over 90 days.

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

Bank of America  vs.  iShares Core SP

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.

iShares Core SP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank of America and IShares Core

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

The idea behind Bank of America and iShares Core SP 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.