Correlation Between B of A and Columbia Acorn

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Can any of the company-specific risk be diversified away by investing in both B of A and Columbia Acorn 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 B of A and Columbia Acorn 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 Columbia Acorn, you can compare the effects of market volatilities on B of A and Columbia Acorn 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 B of A with a short position of Columbia Acorn. Check out your portfolio center. Please also check ongoing floating volatility patterns of B of A and Columbia Acorn.

Diversification Opportunities for B of A and Columbia Acorn

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between B of A and Columbia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and Columbia Acorn in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Acorn and B of A 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 Columbia Acorn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Acorn has no effect on the direction of B of A i.e., B of A and Columbia Acorn go up and down completely randomly.

Pair Corralation between B of A and Columbia Acorn

Considering the 90-day investment horizon Bank Of America is expected to generate 0.97 times more return on investment than Columbia Acorn. However, Bank Of America is 1.03 times less risky than Columbia Acorn. It trades about 0.04 of its potential returns per unit of risk. Columbia Acorn is currently generating about -0.02 per unit of risk. If you would invest  2,805  in Bank Of America on August 29, 2022 and sell it today you would earn a total of  965.00  from holding Bank Of America or generate 34.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

Bank Of America  vs.  Columbia Acorn

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
7 of 100
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. Despite somewhat weak basic indicators, B of A may actually be approaching a critical reversion point that can send shares even higher in December 2022.

B of A Price Channel

Columbia Acorn 
Columbia Performance
0 of 100
Over the last 90 days Columbia Acorn has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Columbia Acorn is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Columbia Price Channel

B of A and Columbia Acorn Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and Columbia Acorn

The main advantage of trading using opposite B of A and Columbia Acorn positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A position performs unexpectedly, Columbia Acorn 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 Columbia Acorn will offset losses from the drop in Columbia Acorn's long position.
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The idea behind Bank Of America and Columbia Acorn 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.
Columbia Acorn vs. T Rowe Price
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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