Correlation Between Bank of America and ANZ Group

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

Diversification Opportunities for Bank of America and ANZ Group

0.02

Correlation Coefficient

Bank of America  ANZ Group

Significant diversification

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

Pair Corralation between Bank of America and ANZ Group

If you would invest  23,123  in Bank of America on September 14, 2024 and sell it today you would lose (4,123) from holding Bank of America or give up 17.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Bank of America  vs.  ANZ Group Holdings

Bank of America

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ANZ Group Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ANZ Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ANZ Group is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank of America and ANZ Group

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

The idea behind Bank of America and ANZ Group Holdings 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.