Correlation Between Bank of America and Dr Foods

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

Diversification Opportunities for Bank of America and Dr Foods

-0.74

Correlation Coefficient

Bank of America  Dr Foods

Pay attention - limited upside

The 3 months correlation between Bank and DRFS is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Dr Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Foods 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 Dr Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Foods has no effect on the direction of Bank of America i.e., Bank of America and Dr Foods go up and down completely randomly.

Pair Corralation between Bank of America and Dr Foods

If you would invest  115,366  in Bank of America on May 1, 2025 and sell it today you would earn a total of  6,389  from holding Bank of America or generate 5.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.64%
Values	Daily Returns

Bank of America  vs.  Dr Foods

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.

Dr Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dr Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Dr Foods is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of America and Dr Foods

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

The idea behind Bank of America and Dr Foods 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.