Correlation Between Bank of America and Select Fund

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

Diversification Opportunities for Bank of America and Select Fund

0.97

Correlation Coefficient

Bank of America  Select Fund

Almost no diversification

The 3 months correlation between Bank and Select is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America and Select Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund I 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 Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund I has no effect on the direction of Bank of America i.e., Bank of America and Select Fund go up and down completely randomly.

Pair Corralation between Bank of America and Select Fund

Considering the 90-day investment horizon Bank of America is expected to generate 1.2 times more return on investment than Select Fund. However, Bank of America is 1.2 times more volatile than Select Fund I. It trades about 0.33 of its potential returns per unit of risk. Select Fund I is currently generating about 0.38 per unit of risk. If you would invest  3,670  in Bank of America on April 20, 2025 and sell it today you would earn a total of  1,062  from holding Bank of America or generate 28.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Bank of America  vs.  Select Fund I

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 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Bank of America exhibited solid returns over the last few months and may actually be approaching a breakup point.

Select Fund I

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund I are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Select Fund showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of America and Select Fund

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

The idea behind Bank of America and Select Fund I 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.