Correlation Between Bank of America and Pro Real

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

Diversification Opportunities for Bank of America and Pro Real

-0.46

Correlation Coefficient

Bank of America  Pro Real

Very good diversification

The 3 months correlation between Bank and Pro is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Pro Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pro Real Estate 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 Pro Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pro Real Estate has no effect on the direction of Bank of America i.e., Bank of America and Pro Real go up and down completely randomly.

Pair Corralation between Bank of America and Pro Real

Assuming the 90 days trading horizon Bank of America is expected to under-perform the Pro Real. But the stock apears to be less risky and, when comparing its historical volatility, Bank of America is 1.22 times less risky than Pro Real. The stock trades about -0.32 of its potential returns per unit of risk. The Pro Real Estate is currently generating about -0.24 of returns per unit of risk over similar time horizon. If you would invest  561.00  in Pro Real Estate on September 29, 2024 and sell it today you would lose (40.00) from holding Pro Real Estate or give up 7.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Bank of America  vs.  Pro Real Estate

Bank of America

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pro Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pro Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Bank of America and Pro Real

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

The idea behind Bank of America and Pro Real Estate 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.