Correlation Between Bank of America and Blueprint Medicines

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

Diversification Opportunities for Bank of America and Blueprint Medicines

0.53

Correlation Coefficient

Bank of America  Blueprint Medicines

Very weak diversification

The 3 months correlation between Bank and Blueprint is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Blueprint Medicines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueprint Medicines Corp 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 Blueprint Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueprint Medicines Corp has no effect on the direction of Bank of America i.e., Bank of America and Blueprint Medicines go up and down completely randomly.

Pair Corralation between Bank of America and Blueprint Medicines

Assuming the 90 days trading horizon Bank of America is expected to generate 6.69 times less return on investment than Blueprint Medicines. But when comparing it to its historical volatility, Bank of America is 9.92 times less risky than Blueprint Medicines. It trades about 0.22 of its potential returns per unit of risk. Blueprint Medicines Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  9,916  in Blueprint Medicines Corp on May 6, 2025 and sell it today you would earn a total of  3,030  from holding Blueprint Medicines Corp or generate 30.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.26%
Values	Daily Returns

Bank of America  vs.  Blueprint Medicines Corp

Bank of America

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental indicators, Bank of America is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Blueprint Medicines Corp

Risk-Adjusted Performance

Good

Over the last 90 days Blueprint Medicines Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unfluctuating primary indicators, Blueprint Medicines exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Blueprint Medicines

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

The idea behind Bank of America and Blueprint Medicines Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.