Correlation Between Bank of America and Upstart Investments

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

Diversification Opportunities for Bank of America and Upstart Investments

0.0

Correlation Coefficient

Bank of America  Upstart Investments

Pay attention - limited upside

The 3 months correlation between Bank and Upstart is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Upstart Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Upstart Investments 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 Upstart Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Upstart Investments has no effect on the direction of Bank of America i.e., Bank of America and Upstart Investments go up and down completely randomly.

Pair Corralation between Bank of America and Upstart Investments

Assuming the 90 days trading horizon Bank of America is expected to generate 0.32 times more return on investment than Upstart Investments. However, Bank of America is 3.11 times less risky than Upstart Investments. It trades about 0.05 of its potential returns per unit of risk. Upstart Investments is currently generating about -0.01 per unit of risk. If you would invest  1,685  in Bank of America on September 23, 2024 and sell it today you would earn a total of  614.00  from holding Bank of America or generate 36.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	75.1%
Values	Daily Returns

Bank of America  vs.  Upstart Investments

Bank of America

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 8 (%) 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.

Upstart Investments

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Upstart Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Upstart Investments is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Bank of America and Upstart Investments

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

The idea behind Bank of America and Upstart Investments 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.