Correlation Between Bank of America and Brookfield
Can any of the company-specific risk be diversified away by investing in both Bank of America and Brookfield 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 Brookfield 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 Brookfield, you can compare the effects of market volatilities on Bank of America and Brookfield 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 Brookfield. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Brookfield.
Diversification Opportunities for Bank of America and Brookfield
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Brookfield is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Brookfield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield 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 Brookfield. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield has no effect on the direction of Bank of America i.e., Bank of America and Brookfield go up and down completely randomly.
Pair Corralation between Bank of America and Brookfield
Assuming the 90 days trading horizon Bank of America is expected to under-perform the Brookfield. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.32 times less risky than Brookfield. The stock trades about -0.25 of its potential returns per unit of risk. The Brookfield is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 8,346 in Brookfield on September 25, 2024 and sell it today you would lose (67.00) from holding Brookfield or give up 0.8% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of America vs. Brookfield
Performance |
Timeline |
Bank of America |
Brookfield |
Bank of America and Brookfield Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Brookfield
The main advantage of trading using opposite Bank of America and Brookfield positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Brookfield 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 Brookfield will offset losses from the drop in Brookfield's long position.Bank of America vs. Ocumetics Technology Corp | Bank of America vs. HPQ Silicon Resources | Bank of America vs. Enerev5 Metals | Bank of America vs. Lion One Metals |
Brookfield vs. Berkshire Hathaway CDR | Brookfield vs. JPMorgan Chase Co | Brookfield vs. Bank of America | Brookfield vs. Alphabet Inc CDR |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
Other Complementary Tools
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges |