Correlation Between B of A and GM

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both B of A and GM 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 GM 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 General Motors, you can compare the effects of market volatilities on B of A and GM 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 GM. Check out your portfolio center. Please also check ongoing floating volatility patterns of B of A and GM.

Diversification Opportunities for B of A and GM

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between B of A and GM is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank Of America and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 GM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of B of A i.e., B of A and GM go up and down completely randomly.

Pair Corralation between B of A and GM

Considering the 90-day investment horizon Bank Of America is expected to generate 0.74 times more return on investment than GM. However, Bank Of America is 1.34 times less risky than GM. It trades about 0.03 of its potential returns per unit of risk. General Motors is currently generating about 0.01 per unit of risk. If you would invest  2,492  in Bank Of America on July 2, 2022 and sell it today you would earn a total of  578.00  from holding Bank Of America or generate 23.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Bank Of America  vs.  General Motors

 Performance (%) 
       Timeline  
Bank Of America 
B of A Performance
0 of 100
Over the last 90 days Bank Of America has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, B of A is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

B of A Price Channel

General Motors 
GM Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, GM is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

GM Price Channel

B of A and GM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with B of A and GM

The main advantage of trading using opposite B of A and GM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if B of A position performs unexpectedly, GM 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 GM will offset losses from the drop in GM's long position.
B of A vs. Amazon Inc
The idea behind Bank Of America and General Motors 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.
GM vs. Amazon Inc
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

Other Complementary Tools

Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go
Earnings Calls
Check upcoming earnings announcements updated hourly across public exchanges
Go
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Go
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go