Correlation Between Bancolombia and Bank of America
Can any of the company-specific risk be diversified away by investing in both Bancolombia and Bank of America 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 Bancolombia and Bank of America into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bancolombia SA ADR and Bank of America, you can compare the effects of market volatilities on Bancolombia and Bank of America 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 Bancolombia with a short position of Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bancolombia and Bank of America.
Diversification Opportunities for Bancolombia and Bank of America
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bancolombia and Bank is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Bancolombia SA ADR and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America and Bancolombia 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 Bancolombia SA ADR are associated (or correlated) with Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Bancolombia i.e., Bancolombia and Bank of America go up and down completely randomly.
Pair Corralation between Bancolombia and Bank of America
Considering the 90-day investment horizon Bancolombia SA ADR is expected to generate 2.42 times more return on investment than Bank of America. However, Bancolombia is 2.42 times more volatile than Bank of America. It trades about 0.03 of its potential returns per unit of risk. Bank of America is currently generating about 0.03 per unit of risk. If you would invest 3,186 in Bancolombia SA ADR on September 4, 2024 and sell it today you would earn a total of 79.00 from holding Bancolombia SA ADR or generate 2.48% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Bancolombia SA ADR vs. Bank of America
Performance |
Timeline |
Bancolombia SA ADR |
Bank of America |
Bancolombia and Bank of America Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bancolombia and Bank of America
The main advantage of trading using opposite Bancolombia and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bancolombia position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.Bancolombia vs. Banco De Chile | Bancolombia vs. Banco Bradesco SA | Bancolombia vs. Banco Santander Chile | Bancolombia vs. Intercorp Financial Services |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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