Correlation Between Bank of America and Banking Fund

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

Diversification Opportunities for Bank of America and Banking Fund

0.93

Correlation Coefficient

Bank of America  Banking Fund

Almost no diversification

The 3 months correlation between Bank and Banking is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Banking Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Investor 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 Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Investor has no effect on the direction of Bank of America i.e., Bank of America and Banking Fund go up and down completely randomly.

Pair Corralation between Bank of America and Banking Fund

Considering the 90-day investment horizon Bank of America is expected to generate 1.08 times more return on investment than Banking Fund. However, Bank of America is 1.08 times more volatile than Banking Fund Investor. It trades about 0.15 of its potential returns per unit of risk. Banking Fund Investor is currently generating about 0.13 per unit of risk. If you would invest  4,088  in Bank of America on May 5, 2025 and sell it today you would earn a total of  478.00  from holding Bank of America or generate 11.69% 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.  Banking Fund Investor

Bank of America

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 11 (%) 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.

Banking Fund Investor

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banking Fund Investor are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Banking Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Bank of America and Banking Fund

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

The idea behind Bank of America and Banking Fund Investor 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..