Correlation Between Bank of America and Unconstrained Emerging

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

Diversification Opportunities for Bank of America and Unconstrained Emerging

0.53

Correlation Coefficient

Bank of America  Unconstrained Emerging

Very weak diversification

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

Pair Corralation between Bank of America and Unconstrained Emerging

Considering the 90-day investment horizon Bank of America is expected to generate 4.81 times more return on investment than Unconstrained Emerging. However, Bank of America is 4.81 times more volatile than Unconstrained Emerging Markets. It trades about 0.1 of its potential returns per unit of risk. Unconstrained Emerging Markets is currently generating about 0.41 per unit of risk. If you would invest  4,451  in Bank of America on May 17, 2025 and sell it today you would earn a total of  320.00  from holding Bank of America or generate 7.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bank of America  vs.  Unconstrained Emerging Markets

Bank of America

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bank of America may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Unconstrained Emerging

Risk-Adjusted Performance

High

Compared to the overall equity markets, risk-adjusted returns on investments in Unconstrained Emerging Markets are ranked lower than 32 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Unconstrained Emerging may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Bank of America and Unconstrained Emerging

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

The idea behind Bank of America and Unconstrained Emerging Markets 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.