Correlation Between Bank of America and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Bank of America and Basic Materials 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 Basic Materials 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 Basic Materials Ultrasector, you can compare the effects of market volatilities on Bank of America and Basic Materials 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 Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Basic Materials.
Diversification Opportunities for Bank of America and Basic Materials
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Bank and Basic is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Basic Materials Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials Ultr 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 Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials Ultr has no effect on the direction of Bank of America i.e., Bank of America and Basic Materials go up and down completely randomly.
Pair Corralation between Bank of America and Basic Materials
Considering the 90-day investment horizon Bank of America is expected to generate 0.86 times more return on investment than Basic Materials. However, Bank of America is 1.16 times less risky than Basic Materials. It trades about 0.28 of its potential returns per unit of risk. Basic Materials Ultrasector is currently generating about 0.17 per unit of risk. If you would invest 3,955 in Bank of America on April 26, 2025 and sell it today you would earn a total of 884.00 from holding Bank of America or generate 22.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Bank of America vs. Basic Materials Ultrasector
Performance |
Timeline |
Bank of America |
Basic Materials Ultr |
Bank of America and Basic Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of America and Basic Materials
The main advantage of trading using opposite Bank of America and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.Bank of America vs. JPMorgan Chase Co | Bank of America vs. Nu Holdings | Bank of America vs. Goldman Sachs Group | Bank of America vs. Pfizer Inc |
Basic Materials vs. Aqr Small Cap | Basic Materials vs. Omni Small Cap Value | Basic Materials vs. Transamerica International Small | Basic Materials vs. Harbor International Small |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |